UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549





Form
10-K


(Mark
One)


[X]
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the fiscal year ended December 31, 2008[   ]
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934For
      the transition period from ____________ to
    ____________ .




Commission
file number 000-30601





WHY
USA FINANCIAL GROUP, INC.


(Exact
name of registrant as specified in its charter)


Nevada
            
            87-0390603(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)2801
      S. Wayzata Boulevard, Suite 100,
              Minneapolis,
      MN
              (Address
      of principal executive offices)
            
            55405
              (Zip
      Code)




Registrant’s
telephone number, including area code:


(612)
767-5037





Securities
registered pursuant to Section 12(b) of the Act: None




Securities
registered pursuant to Section 12(g) of the Act:





Title
      of each classCommon
      Stock, $0.001 par value




Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes [X] or
No [  ]
 
 Indicate by check mark if
the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the
Act. Yes [  ] or No [X]
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] or
No [  ]
  Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [  ]
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
 
 Large
      accelerated filer [  ]
                Accelerated
      filer [  ]
                Non-accelerated
      filer [  ]
                Smaller
      reporting company [X](Do
      not check if a smaller reporting
company)
 
 Indicate
by checkmark whether the registrant is a shell company (as defined in
Rule 12b-2 of the
Act). Yes [  ] No [X]
 
 The
aggregate market value of the voting and non-voting common equity held by
non-affiliates of the registrant as of June 30, 2008 was
$3,124,471
 
 The
number of outstanding shares of the registrant’s common stock as of March 15,
2009 was 108,268,022.







INCORPORATION
BY REFERENCE


None







WHY
USA FINANCIAL GROUP, INC.


Annual
      Report on Form 10-K
 for
      the Fiscal Year Ended December 31,
2008








PART IItem
      1.
            
            Business
            
            3Item 1A.
            
            Risk
    Factors
            
            11Item 1b.
            
            Unresolved Staff Comments
            
            20Item
      2.
            
            Properties
            
            20Item
      3.
            
            Legal
      Proceedings
            
            20Item
      4.
            
            Submission of Matters to a Vote
      of Security Holders
            
            21PART IIItem
      5.
            
            Market for Registrant’s Common
      Equity and Related Stockholder Matters
            
            21Item
      6.
            
            Selected Financial Data
            
            23Item
      7.
            
            Management’s Discussion and
      Analysis of Financial Condition and Results of
      Operations
            
            23Item
      7A.
            
            Quantitative and Qualitative
      Disclosures About Market Risk
            
            31Item
      8.
            
            Financial Statements and
      Supplementary Data
            
            32Item
      9.
            
            Changes in and Disagreements with
      Accountants on Accounting and Financial Disclosure
            
            54Item
      9A
            
            Controls and Other
      Procedures
            
            54Item
      9B.
            
            Other
      Information
            
            55PART IIIItem 10.
            
            Directors, Executive Officers and
      Corporate Governance
            
            55Item 11.
            
            Executive
      Compensation
            
            57Item 12.
            
            Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters
            
            61Item 13.
            
            Certain Relationships and Related
      Transactions, and Director Independence
            
            63Item 14.
            
            Principal Accounting Fees and
      Services
            
            64PART IVItem 15.
            
            Exhibits and Financial Statement
      Schedules
            
            64Signatures
            
            66




2


FORWARD-LOOKING
STATEMENTS





Any
statements in this Annual Report on Form 10-K about our expectations, beliefs,
plans, objectives, prospects, financial condition, assumptions or future events
or performance are not historical facts and are forward-looking statements.
These statements are often, but not always, made through the use of words or
phrases such as “believe,” “anticipate,” “should,” “intend,” “plan,” “will,”
“expects,” “estimates,” “projects,” “positioned,” “strategy,” “outlook” and
similar expressions. Additionally, statements concerning future matters, such as
the development of new products, enhancements of technologies, sales levels and
operating results and other statements regarding matters that are not historical
are forward-looking statements. Accordingly, these statements involve estimates,
assumptions and uncertainties that could cause actual results to differ
materially from the results expressed in the statements. Any forward-looking
statements are qualified in their entirety by reference to the factors discussed
throughout this Form 10-K. The following cautionary statements identify
important factors that could cause our actual results to differ materially from
those projected in the forward-looking statements made in this Form 10-K. Among
the key factors that have an impact on our results of operations
are:




•
            
            the
      risks and other factors described under the caption “Risk Factors” under
      Item 1A of this Form 10-K;•
            
            the
      integration of acquired businesses into our operations;•
            
            general
      economic and business conditions;•
            
            industry
      trends;•
            
            our
      assumptions about customer acceptance, overall market penetration and
      competition from providers of alternative products and
      services;•
            
            our
      funding requirements; and•
            
            availability,
      terms and deployment of capital.




Because
the factors referred to above could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements made by us,
you should not place undue reliance on any such forward-looking statements.
Further, any forward-looking statement speaks only as of the date on which it is
made, and we undertake no obligation to update any forward-looking statement to
reflect events or circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events. New factors emerge from
time to time, and their emergence is impossible for us to predict. In addition,
we cannot assess the impact of each factor on our business or the extent to
which any factor, or combination of factors, may cause actual results to differ
materially from those contained in any forward-looking statements.




In
this Annual Report on Form 10-K, unless the context requires otherwise, “WHY
USA,” “Company,” “we,” “our,” and “us” means WHY USA Financial Group, Inc. and
its subsidiaries.










ITEM 1. Business




WHY USA
Financial Group, Inc. (the Company), is a Nevada corporation. Prior to acquiring
our real estate franchise subsidiary and our Minneapolis mortgage brokerage
business in December 1999, the Company was an inactive public company under the
name Triam Ltd., Inc. with no assets, which had not been engaged in active
operations for many years.  Our principal offices are located in
Minneapolis, Minnesota. Our website is http://www.whyusa.com.
This Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q, our Current
Reports on Form 8-K and any amendments thereto are made available without charge
on our website.




The
following lists the name of the entity, state of incorporation, and/or date of
formation and acquisition of our wholly-owned subsidiaries as well as parent
company: WHY USA Financial Group, Inc., was incorporated as a Utah corporation
in 1980 and reorganized as a Nevada corporation in 1983, Northwest Financial
Ltd. (Northwest), acquired in 1999, incorporated as a Minnesota corporation, WHY
USA North America, Inc. (NA) acquired in 1999, incorporated as a Wisconsin
corporation, and TCS Mortgage, Inc. and its wholly-owned subsidiaries (TCS). TCS
includes the parent company, TCS Mortgage, Inc. (acquired in 2003 by WHY USA
Financial Group, Inc. and incorporated as a California corporation), TCS Realty,
Inc. (Realty) formed in 2004 as a California corporation, and Discover Mortgage
Corporation (Discover) acquired through a capital contribution from WHY USA
Financial Group, Inc. and incorporated as a Minnesota
corporation.


3




The
Company through its subsidiary TCS is currently a mortgage broker only although
prior to December 31, 2006 TCS was a mortgage banker with its own line of
credit; the Company through Realty is a full service realtor operating in the
Southern California and Las Vegas market; the Company through Discover provides
mortgage broker services in the state of Minnesota; and the Company through its
subsidiary NA provides franchised real estate operations to franchisees located
in 14 states, these services center around the WHY USA –“America’s Real Estate
Alternative”® - $990
program.
  Financial
Information - Segments and Geographic Areas
  We focus
our business on two principal business segments, Real Estate Franchise (REF) and
Mortgage Brokerage (MB). Financial information regarding these segments is
included within the notes to our consolidated financial statements included in
this Annual Report of Form 10-K, which begin on page 39.
  The
Company has limited geographic concentrations within its business segments. Our
REF business segment currently operates in several Midwestern states, with
offices elsewhere in the continental United States. Our MB business segment
currently operates in Southern California, Nevada, Minnesota and
Wisconsin.
  Description
of Our Business
  Overview
  WHY USA
Financial Group, Inc. (the Company), a Nevada corporation, is engaged in the
business of providing real estate and mortgage financial services primarily for
transactions involving the sale, purchase or financing of residential
properties. Our business is primarily conducted through three wholly-owned
subsidiaries: Discover Mortgage Corporation and TCS Mortgage, Inc. both operate
in the mortgage brokerage and mortgage banking business; and WHY USA North
America Inc., which operates in the real estate franchise business. Our primary
mission is to develop and provide professional residential real estate and
mortgage brokerage services and support, both to our network of franchise real
estate brokers and their customers and to new home, resale home and refinancing
mortgage borrowers dealing directly with our mortgage lending
offices.
  The
Company was incorporated in Utah in 1980 and in 1983 was duly reorganized as a
Nevada corporation. Prior to acquiring our real estate franchise subsidiary and
our initial mortgage business in December 1999, the Company was an inactive
public company under a former name with no assets, which had not been engaged in
active operations for many years.
  The
Company acquired both its real estate business, WHY USA North America, Inc. and
its initial mortgage business, Northwest Financial Ltd., through a
reorganization and merger which occurred in 1999. Incident to this merger, the
former shareholders of these two companies acquired a majority interest in the
outstanding common stock of the Company. This was a reverse merger for financial
statement and operational purposes, and WHY USA North America, Inc and Northwest
Financial Ltd. became wholly-owned subsidiaries. Northwest Financial Ltd.
transferred 100% of its operations to Discover Mortgage Corporation during
2002.
  Acquisition
Strategy and Transactions
  Since our
reorganization in 1999, a principal element of our business strategy has been to
expand our business through acquisitions of established operations in our
industry. The primary goal of our acquisition strategy is to establish a
national presence in our industry over the coming years, which we believe will
provide economies of scale in our operations due to an increase in our revenue
base through acquisition. Moreover, we believe more favorable terms will be
achieved from financial institutions that provide mortgage funding as our
lending transactions will increase through volume.
  4




During
the years 2001 through 2003, we conducted a number of transactions
including:




i)
            the
      acquisition of three Arizona mortgage lending
  companies;




ii)
            the
      acquisition of a sizeable Minneapolis based mortgage broker;
      and




iii)
            the
      acquisition of a sizeable San Diego based mortgage
      banker/broker.




Target
Markets




We divide
our target customer base into principally two categories:




●
            Mortgagers;
      and





●
            Real
      estate buyers and sellers.




While we
do not believe that any single customer or small group of customers is material
to our business as a whole or to either of our product segments (described
below), more than 50% of our customers in our target markets are located in the
Southern California region of the United States.





Our
Service Offerings




The
Company’s principal service offerings are outlined below.




WHY USA Real Estate
Franchise Program




Through
our WHY USA franchise system we offer independent real estate brokers and agents
a unique proprietary real estate management and marketing program. Our WHY USA
national franchise system, which is registered in 41 states, was developed in
the 1980's by an Arizona company. Its operations were moved to Wisconsin in the
1990's and we acquired this franchise program in 1999.  This business
is owned and operated under a wholly owned subsidiary, WHY USA North America,
Inc. a Wisconsin corporation. Our WHY USA franchise operations are headquartered
in Minneapolis.




The WHY
USA franchise is available to qualified licensed real estate brokers and their
agents, who must enter into a WHY USA Franchise Agreement in order to conduct
business under the WHY USA name and proprietary operational system. WHY USA
provides a unique, confidential plan for operating a real estate office,
consisting of a number of successful listing, selling, marketing and management
techniques developed over the years and supported by training programs,
copyrighted marketing methods, and educational materials.




The
initial franchise fee for a WHY USA real estate office is $9,990 for a
designated territory. Franchisees also pay ongoing transaction fees of $100 per
transaction or 6% of commission revenues; whichever is the lower of, providing
they must pay at least a monthly minimum of $400. Transactions are defined as
any closing or rental as a listing or selling agent, any referral or advance
fees received from a client, and any consulting, assistance or materials
purchase fees related to leasing or selling a property. The estimated initial
investment to commence business as a WHY USA franchisee is approximately $50,000
including the initial franchise fee. We provide substantial initial and ongoing
support to our franchisees including, assistance with locating an office,
provision of a confidential comprehensive Operations Manual, a training seminar
for new franchisees, training and promotional videos and brochures, sample
marketing materials, continuing advisory assistance regarding operations,
supplemental marketing and advertising materials, and advice regarding Internet
access capabilities and procedures.


5




The basic
WHY USA method for listing real property offers the selling owner an
alternative, whereby they can sell their home with full service from their WHY
USA broker for a fee of just $990. Sell the property to a friend, relative or
acquaintance without paying commissions in excess of $990.  This
proprietary system is designed to create listing opportunities for our franchise
brokers as well as offer the listing seller a true alternative to the
traditional real estate commission structure.




We
currently have 30 WHY USA franchise owners, with WHY USA offices in 14
states.  A majority of these offices are located in Minnesota and
several nearby Midwestern states, with the rest spread across the country. We
currently do not have a material presence in Eastern and Southern states,
although our future marketing plan includes directing substantial efforts toward
expansion.




Mortgage
BrokerageServices - Overview




We
acquired TCS Mortgage, Inc., as a wholly owned subsidiary, in December 2003.
 In 2004 we contributed another wholly owned subsidiary, Discover Mortgage,
under the TCS umbrella.  TCS is a full service mortgage broker,
specializing in residential mortgage finance.  TCS was formed in January
1984, and has established a reputation for providing fair and equitable home
loans to its clients and a high quality volume of mortgage product for its
correspondent lenders.  TCS has grown since its inception, averaging
revenues of more than $3.6 million over the past five years.  Over the past
twenty-five years, TCS has originated more than 7,000 mortgage transactions, in
excess of $3.0 billion in funded loan volume.




While TCS
specializes in loans that meet Freddie Mac or Fannie Mae underwriting criteria,
it also provides Federal Housing Administration, Veteran’s Administration,
non-conforming mortgage product, and home equity products for individuals across
a wide range of incomes and credit risks. TCS has established relationships
with many correspondents and wholesale lenders across the United States, and has
the ability to conduct operations in California, Nevada, Minnesota, and
Wisconsin, with fully staffed offices in San Diego, Las Vegas, and Minneapolis,
as well as satellite origination offices.




In this
highly competitive marketplace, TCS’s growth and success reflects a number of
essential factors: a skilled and professional client-oriented sales team, an
effective lending criterion with dependable high quality mortgage product,
repeat business from a large client base, as well as their referrals. With
a broad spectrum of products to offer its clients, TCS has been able to develop
solid relationships with homebuyers, realtors, homebuilders, financial planners,
accountants, and insurance agents; all of which provide TCS with loan
applicants.




As an
established mortgage broker, our objective is to continue to build a nationwide
broker infrastructure to further its mortgage business distribution
channel. TCS continues to focus on borrowers who meet conforming
underwriting guidelines. Our business principles are focused on originating
loans based upon the borrower’s credit worthiness and ability to repay the loan,
as well as the adequacy of the real estate collateral, while providing a high
degree of service to our clients. We believe that this business approach will
continue to contribute to our growth.




TCS’s
focus is to continue to generate organic growth within its existing markets of;
California, Nevada, Minnesota, and Wisconsin, where TCS is currently licensed,
through the recruitment of additional professional mortgage personnel. In
addition, we may seek expansion through acquisitions, mergers, or strategic
alliances in other market areas as the opportunity may arise. The Company,
nor TCS, has identified any viable merger or acquisition targets at this time.
States where property appreciation is constant or shows signs of growth will be
targeted.




Market
Overview




The residential mortgage industry has grown
significantly over the past 10 years, with loan originations totaling over $2.8
trillion in 2004. The Mortgage Bankers Association reported total originations
in 2006 of $2.50 trillion and estimates $2.28 trillion for 2007, $1.86 trillion
for 2008 and an estimated $1.67 trillion for 2009, indicating a steady decrease
from its highs in 2004/2005.





6





Large
banks and mortgage lenders like Wells Fargo, Bank of America/Countrywide, and
Washington Mutual/Chase fund the majority of mortgage loans
originated. Currently TCS delivers loan product to many industry leaders
such as these, under agreements and contractual relationships. However, the
industry is in a state of flux and TCS must continue to obtain and retain these
relationships in a difficult environment.




One of
the factors of recent growth in the mortgage industry was the impact of
sub-prime and Alt-A lenders. The majority of sub-prime loans are Adjustable
Rate Mortgages (ARMs). Unlike a traditional Fixed Rate Mortgage, where the
interest and monthly payments remain fixed for the term of the loan, with an
ARM, the interest rate is fixed only for a specific term, after which it will
periodically (annually or monthly) adjust up or down as a function of some
market index. Inasmuch as an ARM transfers part of the interest rate risk
from the lender to the borrower, less “qualified” borrowers are more easily able
to secure loans. Generally not long-term instruments, ARMs essentially
serve as a “bridge” loan for individuals to purchase a home, establish or
improve their credit and then secure a traditional mortgage at a more attractive
rate. These loans are then pooled into mortgage backed securities; credit
enhanced, rated, and then sold as financial instruments to a wide range of
investors. This portion of the market is currently in a state of
contraction.




Recently
many lenders that specialized in this type of sub-prime product have gone out of
business. Many of these loan products have been discontinued due to the
current credit crunch and this has had a negative effect on the industry as a
whole. The current trend is towards fixed rate, “A” paper product, which
requires greater documentation and “equity” in the property from the
borrower. Currently there are a number of governmental proposals that would
further restrict and regulate the Mortgage Industry. Also, there are a
number of proposals that would in fact assist the borrowers and provide
additional product such as new FHA guidelines, further capacity at Freddie Mac
and Fannie Mae.




TCS
generated more than 200 mortgages and gross fee income of $1.0 million in 2008
from over $65 million in loan funding. This is largely attributable to the
diversification of mortgage products, a professional sales force, excellent
lender relationships, and strong attention to customer service.  While
many of our competitors have exited the market place we have maintained our
staff and facilities and are actively recruiting highly skilled talent that is
available in the market place.




Current Business Model –
Mortgage Broker




Today,
TCS operates strictly as a mortgage broker, securing loans on behalf of its
correspondent and wholesale lenders. The primary function of TCS is to
originate mortgage loans and broker those loans to approved lenders. We offer
conventional, FHA, VA, conforming and non-conforming mortgage products for
individuals across a wide range of incomes and credit risks. We do not make
underwriting decisions; underwriting decisions are ultimately the decision of
the funding lenders.




TCS
maintains stringent guidelines with regard to the mortgages it
originates. All candidates, whether identified through direct solicitation
by the sales team or an individual contacting the company through the website,
are required to provide a completed residential loan application, W-2's and/or
tax returns for the previous two (2) years, and recent bank, stock and
retirement account statements. Applicants may be required to provide
additional documents or verifications based upon their particular history –
i.e., have they ever filed for bankruptcy.




With
every completed application package, TCS’s primary objective is to ensure that
the borrower has the capacity to carry the anticipated payment
schedule. For each of its loan products, TCS has specific qualification
parameters, as designated by each lender, and it will review the applicant’s
credit history, asset portfolio, employment history, and property
values. Each situation is unique and evaluated on a case by case basis,
with the resulting loan specifically for that individual.




Competition




The major
competition for TCS comes from the following, but is not limited to; large
national lending institutions, local banks, credit unions, mortgage bankers, and
other privately owned mortgage companies which provide a variety of products.
There is substantial competition on both the national and local level and TCS
originates only a small portion of all loans originated in the areas in which it
is licensed.





7





TCS is
licensed with HUD as a Supervised Loan Correspondent. As such, we compete
with all HUD approved lenders in the areas we originate mortgage loans. TCS
is required to maintain a minimum adjusted net worth of $113,000 ($63,000 for
the main office plus $25,000 for each of its two HUD branch offices).
Maintaining a license with HUD allows TCS to originate FHA loans that it would
not otherwise be able to originate. Approximately thirteen percent of our
business is currently derived from HUD/FHA loans; we expect this percentage to
grow dramatically with the improvements suggested by the government-controlled
agency. It has become difficult for smaller competitors to maintain these
requirements.




For the
year ended December 31, 2008 the Company through its wholly-owned subsidiary TCS
fell below the minimum adjusted net worth requirements as a Supervised Loan
Correspondent. The Company will submit with its required Lender Assessment an
action plan to correct the deficiency to its minimum adjusted net worth and
request that HUD maintain its licensure as a Supervised Loan Correspondent. The
Company cannot be certain these steps nor the request of HUD will be successful
in maintaining the licensing or prevent the withdrawal of the
licensing.




Origination
Policies & Procedures




Originations




All
origination activities are conducted in accordance with the Real Estate
Settlement Procedures Act (RESPA), Federal and State laws. TCS operates as
a loan broker and as a Supervised Correspondent Lender for FHA and VA loans. TCS
offers/places the following products:




●
            Conventional loans –
      these loans typically offer the client the best products as related to
      rate and term.




●
            FHA loans – these loans
      offer flexible underwriting guidelines for borrowers that do not qualify
      for conventional loans. Rates and terms are comparable to the conventional
      market.




●
            VA loans – these loans
      offer flexible underwriting guidelines to veteran borrowers. Rates and
      terms are comparable to the conventional
market.




●
            Non-Conforming loans –
      these loans offer flexible underwriting criteria at a higher cost to the
      borrower. The higher cost is typically in the form of interest rate and
      fees.




The loan
originator will send disclosure documents to the borrower within three (3) days
of origination regardless of the type of loan or product selected. Due to
automation, the hand written loan application is seldom used. If the
transaction is a purchase, as opposed to a refinance, the originator will send
the HUD GUIDE, Buying Your Home to the borrower.




Files are
maintained in an orderly fashion. The stacking of each loan file corresponds to
the stacking order for that particular loan product. All closed loans must have:
(i) a copy of the funding check to TCS; and (ii) a copy of the signed Settlement
Statement as the top two documents in the stack. All denied or terminated loans
must have a copy of the Statement of Credit Denial, Termination or Change as the
top document.




Quality
Control




Conventional
loans are completely underwritten by the wholesale lender. TCS may use Automated
Underwriting through Freddie Mac LP or Fannie Mae DU. The correspondent lender,
with which TCS works, underwrites all FHA loans. Automated Underwriting is
utilized in the majority of cases but is not always necessary for loan
approval.





8





After a
loan officer has received approval from the Automated Underwriting the
validation process begins. The loan officer or processor is responsible for
validating all conditions per automated underwriting. Subsequently, the
borrower’s file is validated again by the wholesale lender before it is
approved.




The
following quality control policies are in accordance with the loan origination
checklist submitted with our original application for FHA approval.




●
            Loan
      files are inspected monthly on a random basis by the Vice-President to
      insure compliance with HUD/FHA requirements. FHA files are labeled in
      order to distinguish them from the other
files.




●
            Loan
      Originators are notified of file deficiencies and given guidance on how to
      correct. Continued deficiencies will result in that loan originator
      loosing the right to originate FHA
loans.




●
            TCS
      utilizes Pipeline Solutions automated origination and processing
      software. This software is updated regularly to reflect any changes
      in FHA underwriting criteria.




●
            The
      Senior Vice-President regularly monitors the FHA connection for any new
      mortgage letters that apply to TCS’s origination activities. Loan
      originators are notified by e-mail or memo of any
  changes.




●
            TCS
      does not oversee or sponsor any correspondent lenders. TCS does not
      close in our name or service FHA loans. Branch offices of TCS are
      required to send their FHA files to the main office after closing for
      auditing.




●
            VA
      loans are handled in the same manner as FHA loan
  files.




●
            Non-Conforming
      loans are handled in the same manner as Conventional
  loans.




As noted
earlier, TCS does not make the underwriting decision on any loan
file. There are cases when a wholesale lender may miss an item and approve
the loan for closing. These items are reflected as “Post Closing Issues.”
Any post closing issues are first reviewed by the President or Senior
Vice-President and then delegated to the appropriate loan originator. Post
closing items are top priority and must be resolved immediately. The loan
originator must provide evidence of resolving the problem to the President or
Senior Vice-President.




Loan Denials &
Terminations




Loan
denials are handled the same regardless of the loan product type. The loan
originator must complete the form titled, “Statement of Credit Denial,
Termination or Change.” This is typically done within thirty (30) days of
application.




Loans are
considered denied or terminated when the following conditions are present: (i)
the borrower does not meet the underwriting criteria of any of the wholesale
lenders; or (ii) the borrower does not accept the loan product offered and
withdraws their application. If one of these two conditions is present the
loan originator must complete the “Statement of Credit Denial, Termination or
Change” and mail it to the borrower. A copy of the aforementioned statement will
be maintained in the file of the applicant. If the borrower provided any
original documentation, it must be returned at the time the Statement of Credit
Denial, Termination or Change is mailed to the borrower. Additionally, if an
appraisal was completed and paid for by the borrower, a copy of the appraisal
will be mailed to the borrower.




Because
TCS has the ability to offer more flexible loan products many borrowers
encourage loan originators to seek other loan products if the one originally
desired is not obtainable. If the client desires the loan originator to seek
alternative loan products, the “Statement of Credit Denial, Termination or
Change” is not provided because the client’s file is still active and
open.





9





Technology




TCS
utilizes an internet-based infrastructure and sophisticated software interface
to enhance its business and improve productivity. TCS’s websites, www.tcsmortgage.com
and www.discovermortgage.com
are extremely functional and intuitive. This combination enables mortgage
candidates to manage their entire application online. They are able to fill
out the required forms, submit paperwork and chart the status of their
application. The site also provides visitors with a number of information
resources, calculators and other valuable links to support the
home-owner.




TCS
maintains processing centers in San Diego, Las Vegas and Minneapolis, where it
manages continuity and quality control. The loan process is completely automated
and interfaces with the majority of wholesale lenders and third party service
providers. TCS utilizes third party services for certain aspects of its
operation, including document preparation, file generation and automated loan
review. The outsourcing and automation of these operating functions
accelerates the entire process in addition to reducing TCS’s
overhead.




Sales




TCS
obtains its customers in a number of ways, including: solicitations by its sales
force, inquiry from the potential borrowers, repeat business, and
referrals. Once that initial contact has been made, each candidate is
assigned to a representative. In the end, TCS’s success is a direct result of
its sales team and their ability to establish and maintain relationships with
customers. Our dedication to customer satisfaction has been a major factor
in our ability to maintain these relationships and develop a substantial amount
of repeat and referral business.




TCS
attracts and retains talented individuals by providing a competitive
compensation and benefit package. Loan originators are compensated on a
commission basis, dependent upon their experience and performance. Because
TCS compensates its sales team at or above industry standards, retention has not
been an issue.




Marketing




TCS
relies primarily upon its professional sales force, and referrals to market its
array of mortgage products and services. In addition we have been active in
the new home marketing programs through a number of homebuilders.




Internet




TCS
utilizes the Internet and email databases for promotional activities. Our
primary means of promoting the website is the registration with a number of
search engines, insuring that web users are directed to the site when they
search for information regarding mortgages. Our web address is featured on
all printed materials, including stationary and marketing
pieces.




Advertising




TCS is
considering the use of professional direct marketing infomercials on television
as well as through the use of the Internet. In addition we believe that the
use of these infomercials will enable us to cross sell our services through to
our franchise network. Currently we use very little traditional advertising
activities.




Planned
Expansion of TCS




As a well
established broker with a solid infrastructure and working operations, TCS is
well-positioned to expand its operations and increase revenues. TCS anticipates
strong organic growth through the recruitment of professional mortgage
originators as well as consolidation of small and mid-sized mortgage brokerages
that are in local proximity to its current branch offices.





10





Expansion
- New Geographic Markets




While
management continues to organically grow its customer base in its existing
markets, we intend on expanding our market, eventually with a national presence.
For the short term we will penetrate markets where proximity dictates,
facilitating our efforts and minimizing the need for additional infrastructure
and working capital.




Increase
Service Offerings




Additional
loan programs and service offerings will be developed or sought out as the
opportunity develops and demand warrants. This growth will be generated
both organically and through acquisition or strategic alliance. It is
anticipated that TCS will serve as the center for these operations, with
acquired companies and joint ventures operating under the umbrella of the parent
company.




Marketing
and Sales – Combined




We expend
considerable financial and personnel resources toward conducting an ongoing
advertising and marketing program to promote our WHY USA franchise brand
awareness and develop customer loyalty, as well as to assist our real estate
franchisees in obtaining new prospective customers. Our franchise marketing
program focuses primarily on support of existing WHY USA franchisees, including
marketing activities such as advertising in selected general print and other
media, placing ads in certain industry periodicals, providing on-site training
and technical assistance to our franchisees, preparation of professional
brochures, videos and other sales materials portraying the services and
advantages of WHY USA franchises, participation in selected industry trade
shows, and maintaining a WHY USA Internet website.




Our loan
officers rely principally on personal sales, leads, email, and referrals
developed by them personally or through our web sites to market our mortgage
lending services. Incidental to our mortgage origination business in Minnesota,
we had an experienced telemarketing center located in Sebeka, Minnesota, which
developed leads to target customers seeking initial mortgage loans or
refinancing. This telemarketing center was closed to consolidate costs and
comply with “do not call” lists and regulations. The Company may in the future
re-establish a telemarketing center in order to expand upon its lead generation
capabilities as well as to supplement possible infomercial and other media
generated exposure.




Employees




As of
March 31, 2009, we employ 37 people and retain the services of 11 independent
contractors. Full time employees number 35 for the Company. We currently have 4
executives that manage or oversee our subsidiaries and their operations. None of
our employees belong to a labor union. We consider our employee relations to be
good.




Our
success will depend in large part upon our ability to attract and retain
employees. In addition, pursuant to our growth initiatives we expect to employ a
number of temporary and contract employees. We face competition in this regard
from other companies, industries as well as market conditions.




ITEM 1A. Risk Factors




Certain
statements under the headings “Risk Factors,” “Management's Discussion and
Analysis of Financial Condition and Results of Operations,” “Business,” and
elsewhere in this report constitute “forward-looking statements” within the
meaning of the rules and regulations promulgated by the Securities and Exchange
Commission.




THIS
REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE
RESULTS DISCUSSED IN SUCH FORWARD-LOOKING STATEMENTS.





11





This
report contains a number of forward-looking statements, which reflect the
Company's current views with respect to future events and financial performance.
Such forward-looking statements are based on management's beliefs and
assumptions regarding information that is currently available, and are made
pursuant to the “safe harbor” provisions of the federal securities laws. These
forward-looking statements are subject to certain risks and uncertainties. The
Company's actual performance and results could differ materially from those
expressed in the forward-looking statements due to risks and uncertainties that
could materially impact the Company in an adverse fashion and are only
predictions of future results, and there can be no assurance that the Company's
actual results will not materially differ from those anticipated in these
forward-looking statements. In this report, the words
“anticipates,” “believes,” “expects,” “intends,” “plans,” “may,” “future,”
and similar expressions identify forward-looking statements. Readers are
cautioned to consider the risk factors described below and not to place undue
reliance on the forward-looking statements contained herein, which speak only as
of the date hereof. The Company has no obligation to publicly update or revise
any of the forward-looking statements to reflect events or circumstances that
may arise after the date hereof.




As
described above, the forward-looking statements contained in this report involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These risks,
uncertainties and other factors include, but are not limited to the following:
the Company's lack of operating history and the uncertainty of profitability;
the Company's ability to obtain capital, which is critical to its future
existence, and if able to obtain capital it can do so on terms that are
advantageous or desirable to current shareholders and/or stakeholders of the
Company, the Company's ability to successfully advertise or market its service
offerings to a degree necessary for it to drive revenue to a level necessary to
reach profitability, the Company's ability to develop and introduce new service
offerings; the uncertainty of market acceptance of the Company's service
offerings and their market penetration; the uncertainties related to the
Company's real estate franchise programs; the Company's future reliance on
collaborative partners; the Company's future revenues, marketing experience and
dependence on other parties; the risks associated with obtaining governmental
approval and oversight of the Company's service offerings; the highly
competitive industry in which the Company operates and the rapid pace of
technological change within that industry; the uncertainty of proprietary
information protection and the Company's reliance on such proprietary
information; changes in or failure to comply with governmental regulation; the
Company's dependence on key employees; and general economic and business
conditions and other factors referenced in this report. Accordingly, any
investment in the Company's common stock hereby involves a high degree of risk.
In addition to the other information contained in this Form 10-K, the Company's
business should be considered carefully before purchasing any of the securities
of the Company. In addition to other information contained in this report,
prospective investors should carefully consider the following factors before
purchasing securities of the Company. Prospective investors are cautioned that
the statements in this Section that are not descriptions of historical facts may
be forward-looking statements that are subject to risks and uncertainties.
Actual results could differ materially from those currently anticipated due to a
number of factors, including those identified in “Risk
Factors,” “Business,” and elsewhere in this report.




Limited
operating history




We have a
limited operating history upon which an investor can evaluate our potential for
future success. We have generated an accumulated deficit of approximately $12.7
million through December 31, 2008. Although our acquired subsidiaries have had
profitable years, upon acquisition their business prospects became subject to
market conditions that severely limited their profitability. As a result, there
is limited historical financial data upon which an investor can make an
evaluation of our performance or make a decision regarding an investment in
shares of the Company’s common stock.




Problems,
expenses, delays, risks inherent in mortgage industry/real estate
enterprises




●
            limited
      capital;●
            delays
      by third party providers;●
            possible
      cost overruns due to delay in the execution of
services;●
            unforeseen
      difficulties in the Company's franchise business;●
            risks
      associated with obtaining governmental approval or failing to comply with
      governmental regulation with respect to the Company's
      business;●
            uncertain
      market acceptance; and●
            the
      absence of profitable operating
history.




Therefore,
the Company may never achieve or maintain profitable operations as well as
encounter unforeseen difficulties that may deplete its capital resources more
rapidly than anticipated.





12





RISKS
RELATED TO THE GROWTH OF OUR BUSINESS




Management
of our growth




We plan
to experience growth from the offering of our services through acquisitions as
well as through geographic expansion. Such growth, if realized, could place a
significant strain on the Company's management, financial, operating and
technical resources. Failure to manage growth effectively could have a material
adverse effect on the Company's financial condition or results of operations.
Additionally, although the Company presently has no executable plans to acquire
any “companies or assets of a material amount,” should the Company decide to
adopt acquisition plans as part of a future growth strategy, no assurance can be
given that the Company can effectively integrate such acquired operations or
assets with its own operations. The Company may also seek to finance any such
future acquisition by debt financing or through the issuance of equity
securities and there can be no assurance that any such financing will be
available at acceptable terms or at all.




Competition
- far greater market share, market recognition, and financial
resources




The
business of offering, marketing, and selling services for the mortgage and real
estate industry is highly competitive. Numerous other businesses compete
actively for customers, including a number of national and international
companies with vast financial resources. Many of the Company's competitors are
substantially larger than the Company and have greater market share, market
recognition, and financial resources.




The market for other services that the Company
would like to introduce in the future will also be very highly competitive and
dominated by many of the same competitors and challenges that the Company faces
for its current services. Because the Company's ability to reach profitability
and remain competitive depends in part upon the successful introduction of new
products/services, the challenges of competitors having vastly greater
resources, market share, proven marketing techniques and services make the
future success of the Company a difficult task, which there can be no assurance
is achievable.




The
intense competition in the mortgage and real estate industry has also led to
rapid technological developments, evolving industry standards and frequent
releases of new products and enhancements. As our services are offered more
widely through alternative channels, such as the Internet, we may be required to
make significant changes to our current structure and information systems to
compete effectively. Our inability to continue enhancing our current Internet
capabilities, or to adapt to other technological changes in the industry, could
significantly harm our business, financial condition, liquidity and results of
operations.




Impact
of inflation




Inflation
affects the cost of support services that we use. In recent years, inflation has
been modest. If inflation were to increase, the competitive environment in the
mortgage and real estate market may limit the ability of the Company to recover
higher costs resulting from inflation by raising the prices of our
services.




Dependence
on key personnel




The
Company is dependent on the efforts and abilities of certain of its senior
management, particularly James Kylstad, its Chief Executive Officer. As an
accommodation to the Company, Mr. Kylstad in the past had accepted securities
issued by the Company in lieu of cash compensation for his services and even
deferred payment of his services for many years. This has allowed the Company to
retain its key personnel. The interruption of the services of such key
management could have a material adverse effect on the Company's operations,
profits and future development, if suitable replacements are not promptly
obtained, and there can be no assurance that such key personnel would accept
compensation other than cash for their services in the future. In addition, the
Company's success depends, in part, upon its ability to attract and retain other
talented personnel. There can be no assurance that the Company will be able to
attract and retain such personnel necessary for the development of the business
of the Company.




Financial
results fluctuate - seasonality and other timing factors




The
mortgage and real estate industry is generally subject to seasonal trends. These
trends reflect the general pattern of housing sales, which typically peak during
the spring and summer seasons. As such, our quarterly operating results
fluctuate, reflecting the seasonality of the industry.





13





Failure
to integrate acquired businesses




As part
of our strategy to develop and identify new services and technologies, we have
made and may continue to make acquisitions. Our integration of the operations of
acquired businesses requires significant efforts, including the coordination of
information technologies, sales and marketing, operations, and finance. These
efforts result in additional expense and divert significant amounts of
management’s time from other projects. Our failure to manage successfully and
coordinate the growth of the combined company could have an adverse impact on
our business. In addition, there is no guarantee that some of the businesses we
acquire will become profitable or remain so. If our acquisitions do not reach
our initial expectations, we may record unexpected impairment charges. Factors
that will affect the success of our acquisitions include:




●
            
            presence
      or absence of adequate internal controls and/or significant fraud in the
      financial systems of acquired companies;●
            
            any
      decrease in customer loyalty caused by dissatisfaction with the combined
      companies’ service offering, sales and marketing practices, including
      price increases;●
            
            our
      ability to retain key employees of the acquired
company;●
            
            the
      ability of the combined company to achieve synergies among its constituent
      companies, such as increasing sales of the combined company’s service
      offering, achieving expected cost savings and effectively combining
      technologies to develop new service offerings; and●
            
            disruption
      in the fulfillment of our services due to integration processes and
      therefore loss of revenue.






RISKS
RELATED TO THE MORTGAGE AND REAL ESTATE INDUSTRY




Changes
in the economic and regulatory environment surrounding residential mortgage
loans and real estate sales




Our
anticipated investment in the residential mortgage brokerage and real estate
industry will be subject to risks related to national economic conditions,
changes in the investment climate for residential mortgage loans, changes in
local real estate market conditions, changes in interest rates, changes in the
values of all assets owned or held as collateral by the Company, governmental
rules and fiscal policies, and other factors beyond the control of our
management. Changes in these economic and regulatory factors could cause
consumers to refrain from purchasing properties, reduce tax benefits, or
otherwise render unattractive some of the ways we conduct our
business.




Income
may be affected by many factors including, but not limited to: (1) the inability
to achieve or maintain gross revenues as projected; (2) adverse changes in
general economic conditions which would affect the purchasing and refinancing of
homes among the public; (3) the lack of acceptance by the community of the
Company's service offerings; (4) adverse local conditions, such as competitive
conditions; (5) the failure of the real estate market to develop as expected;
(6) governmental regulation; or (7) catastrophes such as fires, earthquakes and
floods. Income is subject to various factors, including the above, and may
fluctuate from time to time, whereas expenses related to the real estate
industry, such as interest rates, loan payments, taxes, utility costs,
maintenance costs and insurance, tend either to be fixed or
increase.




Our
competitors are larger, diversified, and have extensive experience in the
mortgage brokerage industry




We are
not a development stage company, however many of our competitors are
larger, diversified, and may have more experience in the mortgage brokerage and
real estate industry. The Company competes with others engaged in our
business segments, many of whom have greater financial resources and experience
than our management or the Company. Competition in our market niche depends upon
a number of factors including price and interest rates of loans, speed of loan
processing, reliability, quality of service and support services.





14





Slowdown
in the economies of California, Nevada or Minnesota




Since
inception, a significant portion of the mortgage loans we have brokered
(approximately 98%) have been secured by property in California, Nevada and
Minnesota.  An overall decline in the economy or the residential real
estate market, or the occurrence of a natural disaster that is not covered by
standard homeowners’ insurance policies, in one of the aforementioned states
could decrease the value of mortgaged properties. This, in turn, might
discourage consumers from purchasing homes in these areas. This could restrict
our success in attracting clients and significantly harm our business, financial
condition, liquidity and results of operations.




Limited
experience in markets outside of California, Nevada or Minnesota




Currently,
the Company operates in California, Nevada and Minnesota. Depending on the
market and our performance, we intend to expand our operations throughout the
contiguous United States. However, we have limited experience outside of the
markets in which we currently operate. Real estate markets vary greatly from
location to location and the rights of secured real estate lenders vary
considerably from state to state. Our limited experience in most U.S. real
estate markets may impact our ability to make prudent investment decisions.
Accordingly, where we deem it necessary we may work with independent advisors
and local legal counsel in markets where we lack experience.  We may
not have the opportunity to evaluate the qualifications of such advisors
therefore no assurances can be given that they will render prudent advice to us.
We can provide no assurances that we will be successful in any geographic
expansion of our operations or that we will be able to mitigate the risk of such
expansion by working with local advisors or lawyers. Any difficulties
encountered by us in this regard could adversely affect our operating results,
slow down our expansion plans or result in a reduction of loan originations,
franchise sales, any of which may diminish our revenues.




Losses
due to fraudulent and negligent acts




When the
Company brokers mortgage loans, we rely heavily upon information supplied by
third parties including the information contained in the loan application,
property appraisal, title information and employment and income documentation.
If any of this information is intentionally or negligently misrepresented and
such misrepresentation is not detected prior to loan funding, the value of the
loan may be significantly lower than expected. Whether a misrepresentation is
made by the loan applicant, the mortgage broker, another third party or one of
our own employees, we generally bear the risk of loss associated with the
misrepresentation.




If we
experience a significant number of such fraudulent or negligent acts, our
business, financial condition, liquidity and results of operations would be
significantly harmed.




Our
wholly-owned subsidiary must maintain a minimum adjusted net worth




In order
to maintain approval with U.S. Department of Housing and Urban Development
(HUD), a licensed Supervised Loan Correspondent must maintain an adjusted net
worth of at least $63,000 dollars and $25,000 dollars for each branch office it
maintains. In the event that a Supervised Loan Correspondent falls below the
minimum requirements HUD has the ability to pursue administrative action which
may include a letter of reprimand, probation, suspension or withdrawal of the
license.




TCS is
registered with HUD as a Supervised Loan Correspondent and must maintain a total
adjusted net worth of $113,000 ($63,000 dollars for the main office and $25,000
dollars for each of its branch offices).  Approximately thirteen
percent (13%) of the Company’s business currently is derived from
HUD.




For the
year ended December 31, 2008 the Company through its wholly-owned subsidiary TCS
fell below the minimum adjusted net worth requirements as a Supervised Loan
Correspondent. The Company will submit with its required Lender Assessment an
action plan to correct the deficiency to its minimum adjusted net worth and
request that HUD maintain its licensure as a Supervised Loan Correspondent. The
Company cannot be certain these steps nor the request of HUD will be successful
in maintaining the licensing or prevent the withdrawal of the
licensing.





15





Multi-jurisdictional
scope of our operations exposes us to risks




Because
we provide mortgage brokerage services in multiple states, we must comply with
the laws and regulations, as well as judicial and administrative decisions, of
all of these jurisdictions, as well as an extensive body of federal law and
regulations. The volume of new or modified laws and regulations has increased in
recent years, and, in addition, individual cities and counties have begun to
enact laws that restrict loan origination activities in those cities and
counties. The laws and regulations of each of these jurisdictions are different,
complex and, in some cases, in direct conflict with each other. As our
operations grow, it may be more difficult to comprehensively identify, to
accurately interpret and to properly program our technology systems and
effectively train our personnel with respect to all of these laws and
regulations, thereby potentially increasing our exposure to the risks of
noncompliance with these laws and regulations.




Our
failure to comply with these laws can lead to:




●
            
            civil
      and criminal liability;●
            
            loss
      of approved status;●
            
            demands
      for indemnification or loan repurchases from purchasers of our loans;
      and●
            
            class
      action lawsuits.




Management
of interest rate volatility




Changes
in interest rates can have adverse effects on various aspects of the Company’s
business, particularly in the area of volume of mortgage loans originated.
Fluctuating interest rates may affect the net income earned by the Company.
While the Company monitors the interest rate environment, there can be no
assurance that the profitability of the Company would not be adversely affected
during any period of changes in interest rates. In such event, the business,
prospects, financial condition and results of operations of the Company could be
materially adversely affected.




Losses
from defaulted mortgage loans




We are at
risk for mortgage loan defaults under certain agreements if the borrower does
not make the first monthly mortgage payment.  When we originate a
loan, we may make representations and warranties to the lenders and insurers
that we have properly originated the loans under state laws, investor guidelines
and program eligibility standards. Funding entities of our loans typically
conduct their own review of the loans, and we may be liable for unpaid principal
and interest on defaulted loans if we have breached our representations and
warranties.




In some
instances, we may even be required to repurchase the loan. Any liability from
breaches of our representations and warranties, including mandatory repurchases
of loans, would harm our mortgage brokerage business.




Business
volume during peak periods is less than expected




The
mortgage brokerage and real estate industry is generally subject to seasonal
variations. These variations reflect the national pattern of sales and re-sales
of homes in our markets, although refinancings tend to be less seasonal and more
closely related to changes in interest rates. The magnitude of seasonal
variations is beyond our control and could adversely impact our business,
especially if we are unable to take advantage of increased volume during peak
periods, or if peak periods do not produce anticipated business
volume.





16





BUSINESS
RISKS




Attract
and retain qualified employees




The
Company depends upon our employees and retail loan officers to attract clients
by, among other things, developing relationships with financial institutions,
other mortgage companies and brokers, real estate brokers, agents, borrowers and
others. We believe that these relationships lead to repeat and referral
business. The market for skilled executive officers, employees, and loan
officers is highly competitive and historically has experienced a high rate of
turnover. In addition, if a manager leaves our business there is an increased
likelihood that other members of his or her team will follow. Competition for
qualified personnel may lead to increases in hiring and retention costs. If the
Company is unable to attract or retain a sufficient number of skilled personnel
at manageable costs, the Company will be unable to continue to attract clients,
which will ultimately reduce our revenues.




Interruption
in or breach of our information systems




WHY USA
relies heavily upon communications and information systems to conduct its
business. As we implement our growth strategy and increase our volume of
business, that reliance will increase. Any failure or interruption or breach in
security of our information systems or the third-party information systems on
which we rely could cause delays and could result in fewer loan applications
being received and slower processing of applications. The occurrence of any
failures or interruptions could significantly harm our business.




Ability
to adapt to and implement technological changes




Our
mortgage brokerage and real estate business (as well as our franchise business)
is currently dependent upon our ability to effectively interface with our
brokers, borrowers, and other third parties to efficiently process loan
applications and closings. The origination process is becoming more dependent
upon technological advancement, such as the ability to process applications over
the Internet, accept electronic signatures, process status updates instantly and
other customer-expected conveniences that are cost-efficient to our process.
Implementing this new technology and becoming proficient with it may also
require significant capital expenditures. As these requirements increase in the
future, we will have to fully develop these technological capabilities to remain
competitive or our business will be significantly harmed.




Additional
financing could dilute investors; additional financing unavailable or
unfavorable terms




The
development and national market expansion of the Company's service offering
will require a substantial commitment of funds. We will be required to raise
additional capital through equity (including convertible preferred stock such as
our Preferred A series) and/or debt financing (including convertible debt). Any
equity financings could result in dilution to our then-existing stockholders.
Sources of debt financing may result in higher interest expense. Any financing,
if available, may be on terms unfavorable to us. If such capital raising efforts
are unsuccessful, we may be required to reduce or curtail operations. The
Company's actual capital requirements will depend on many factors, including,
but not limited to, the cost and timing of product development and launch
activities, the success of research and development efforts, the cost and timing
of expansion of its sales and marketing activities, the progress of the
Company's national distribution efforts and the commercialization efforts of the
Company's competitors, the costs involved in acquiring, prosecuting,
maintaining, enforcing and defending intellectual property rights, developments
related to regulatory issues, and other factors.




Level
of debt and debt service




Even if
we are able to meet our debt service obligations, the amount of debt we have
could adversely affect us in a number of ways, including by:




●
            
            limiting
      our ability to obtain any necessary financing in the future for working
      capital, capital expenditures, debt service requirements, or other
      purposes;


●
            
            limiting
      our flexibility in planning for, or reacting to, changes in our
      business;●
            
            placing
      us at a competitive disadvantage relative to our competitors who have
      lower levels of debt;●
            
            making
      us more vulnerable to a downturn in our business or the economy
      generally;




17




●
            
            subjecting
      us to the risk of being forced to refinance these amounts when due at
      higher interest rates; and


●
            
            using
      a substantial portion of our cash to pay principal and interest on our
      debt, instead of contributing those funds to other purposes such as
      working capital and capital
expenditures.




Audit
by the taxing authorities




We are
subject to various federal, state and local taxes in the U.S. Significant
judgment is required in determining the provision for income taxes. Although we
believe our tax estimates are reasonable, if the IRS or other taxing authority
disagrees with the positions taken by the Company on its tax returns, we could
have additional tax liability, including interest and penalties. If material,
payment of such additional amounts upon final adjudication of any disputes could
have a material impact on our results of operations and financial
position.




Delinquent
in payments to unsecured creditors




The
Company is delinquent with a number of unsecured creditors for which no payment
arrangements exist or for which no agreement to forestall collection action has
been agreed upon.  In light of the Company's current financial
condition, the Company's cash liability, if any, arising from legal proceedings,
could have a material adverse effect on the Company's financial position,
results of operations or cash flows. Unsecured creditors amount to approximately
$550,000, excluding officers and directors, and are comprised of a number of
creditor’s owed amounts of less than $5,000. Whenever feasible the Company
negotiates with these creditors or debt holders to reach settlement agreements
that are acceptable to the Company, however, if the Company is unable to reach
acceptable settlement arrangements it may be subject to various collection
actions.




No
payment of dividends




No cash
dividends have been paid on our common stock. We expect that any income received
from operations will be devoted to our future operations. We do not expect to
pay cash dividends in the foreseeable future. Payment of dividends would depend
upon our profitability at the time, cash available for those dividends, and
other factors.




Public
market for our common stock is volatile and limited




Our
operating results and stock price have in the past been and will continue to be,
subject to fluctuations as a result of a number of factors, including those
listed in this section of this report and those we have failed to foresee. Our
stock price could be affected by any inability to meet analysts’ expectations,
general fluctuations in the stock market or the stocks of companies in our
industry. Such volatility has had a significant effect on the market prices of
many companies’ securities for reasons unrelated to their operating performance
and has in the past led to securities class action litigation. Securities
litigation against us could result in substantial costs and a diversion of our
management’s attention and resources, which could have an adverse effect on our
business.




Our
common stock is currently quoted on the Over-the-counter Bulletin Board under
the ticker symbol WUFG. The market price of the Company's common stock has been,
and is likely to continue to be, volatile. Factors such as announcements of new
service offerings by the Company or its competitors, changes in pricing policies
by the Company or its competitors, quarterly fluctuations in the Company's
operating results, announcements relating to strategic relationships, government
regulatory actions, general conditions in the market for our services, overall
market conditions and other factors may have a significant impact on the market
price of our common stock. In addition, in recent years the stock market in
general, and the shares of financial and real estate service companies have
experienced extreme price fluctuations. This volatility has had a substantial
effect on the market prices of securities issued by many companies for reasons
unrelated to the operating performance of the specific companies. These broad
market fluctuations may adversely affect the market price of the Company's
common stock.





18





In
addition, the public float of the Company's common stock is small in comparison
to total shares outstanding on a fully diluted basis, resulting in a very thin
public market for the trading of the Company's shares. Limited trading volume
entails a high degree of volatility in the stock price. In the 52-week period
from January 1, 2008 to December 31, 2008, the closing price for the shares of
the Company's stock on the Over-the-counter Bulletin Board ranged from $0.03 to
$0.07. This situation of limited liquidity and volatile stock price will most
likely continue for the near future.




Subject
to “penny stock” rules of the SEC




The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a “penny stock,” for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:




*
            that
      a broker or dealer approve a person's account for transactions in penny
      stocks; and*
            that
      a broker or dealer receives from the investor a written agreement to the
      transaction, setting forth the identity and quantity of the penny stock to
      be purchased.




In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must:




*
            obtain
      financial information and investment experience objectives of the person;
      and*
            make
      a reasonable determination that the transactions in penny stocks are
      suitable for that person and the person has sufficient knowledge and
      experience in financial matters to be capable of evaluating the risks of
      transactions in penny stocks.




The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:




*
            sets
      forth the basis on which the broker or dealer made the suitability
      determination; and*
            that
      a broker or dealer received a signed, written agreement from the investor
      prior to the transaction.




Generally,
brokers may be less willing to execute transactions in securities subject to the
“penny stock” rules. This may make it more difficult for investors to dispose of
our common stock and cause a decline in the market value of our
stock.




Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.




Rule
144 sales




As of
December 31, 2008, the Company had approximately 107,268,022 shares of the
Company's outstanding common stock as “restricted securities” which may be sold
only in compliance with Rule 144 adopted under the Securities Act of 1933, as
amended or other applicable exemptions from registration. Rule 144 provides that
a person holding restricted securities for a period of one year may thereafter
sell in brokerage transactions, an amount not exceeding in any three month
period the greater of either (i) 1% of the Company's outstanding common stock,
or (ii) the average weekly trading volume during a period of four calendar weeks
immediately preceding any sale. Persons who are not affiliated with the Company
and who have held their restricted securities for at least two years are not
subject to the volume limitation. Potential or actual sales of the Company's
common stock by present shareholders under Rule 144 may have a depressive effect
on the price of the Company's stock.





19





CONCENTRATED
CONTROL RISKS




Collective
power to make all major decisions




Presently
our management team collectively owns 60.7% of the outstanding common stock as
determined in accordance with Rule 14d-3 of the Securities Exchange Act of 1934,
as amended (the “Act”). See,“Security Ownership of Certain Beneficial Owners and Management.” Our
management and directors, therefore, have significant voting power in
determining major decisions regarding our affairs, including decisions regarding
whether or not to issue stock and for what consideration, whether or not to sell
all or substantially all of our assets and for what consideration and whether or
not to authorize more stock for issuance or otherwise amend our charter or
bylaws. The management and directors will also have significant voting power in
the election of our directors and to dictate our policies.




ITEM 1B. Unresolved Staff
Comments




On
December 29, 2008, the Company filed a response letter to the Securities and
Exchange Commission (the Commission) pertaining to several comments that the
Commission had about certain disclosures made within its December 31, 2007 Form
10-KSB and September 30, 2008 Form 10-Q.




In
addition to the above correspondence, the Company received a letter dated
January 9, 2009 from the Commission with certain comments and questions relating
to the Company’s September 30, 2008 Form 10-Q and the Company’s testing of
impairment of goodwill in accordance with SFAS 142 is sufficient. The Company is
in process of drafting a response to the Commission’s letter of January 9,
2009.




At this
time, the Company cannot determine if there will be any additional comments or
if the outstanding comments will be resolved.




ITEM
2. Properties




The
Company's executive headquarters, real estate franchise subsidiary, and mortgage
lending operations are located in Minneapolis, Minnesota. The property consists
of 11,000 square feet of commercial offices located in downtown Minneapolis, we
currently occupy approximately 2,500 square feet of the facility. The Company
currently owns the office building which houses its corporate
headquarters.




TCS and
Realty conduct their primary operations from approximately 2,000 square feet of
leased facilities in San Diego, California under an operating lease which ends
September 2010. Lease payments for the San Diego location is approximately
$3,900 per month.




Additional
information regarding our properties is contained in Notes 1 and 8 to the
consolidated financial statements included in this Annual Report on Form
10-K.




ITEM 3. Legal Proceedings




The
Company is subject to other potential liabilities under government regulations
and various claims and legal actions that may be asserted. Matters may arise in
the ordinary course and conduct of the Company’s business, as well as through
its acquisitions. Claim estimates that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these matters is subject to many uncertainties. It is reasonably possible
that matters, which may be asserted, could ultimately be decided unfavorably for
the Company. Although the amount of liability at December 31, 2008,
currently cannot be ascertained, the Company believes that any resulting
liability should not materially affect the Company’s consolidated financial
statements.





20





ITEM 4. Submission of Matters to a Vote of Security
Holders




No matter
was submitted to a vote of security holders during the fourth quarter of 2008,
nor for the periods since our last report filed with the SEC. Annual meetings of
the stockholders have not been held since early 2002. Management of the Company
believes that the next annual meeting may be held during 2010 along with its
annual meeting for its WHY USA franchisees. No specific date has been specified
for the annual WHY USA franchise meeting. Matters to be voted on will be
included in our proxy statement to be filed with the SEC and distributed to our
stockholders prior to such meeting.







PART
II




ITEM 5. Market for Registrant’s Common Equity and Related
Stockholder Matters




Market
for Common Stock




The
Company's common stock is traded publicly and quoted on the Over-the-counter
Bulletin Board under the symbol “WUFG.” Since the inception of trading, the
Company's common stock has been sporadic and characterized by low volume from
time to time. Trading prices have fluctuated, and there can be no assurance that
a stable and regular trading market will occur in the future. The table below
sets forth the high and low bid prices for the Company's common stock for
each quarterly period since the last report filed with the SEC. Bid
quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual transactions.




High
            
            LowYear
      ended December 31, 2007First
      quarter
            
            $0.08
            
            
            $0.05Second
      quarter
            
            0.06
            
            
            0.05Third
      quarter
            
            0.08
            
            
            0.04Fourth
      quarter
            
            0.07
            
            
            0.03Year
      ended December 31, 2008First
      quarter
            
            $0.07
            
            
            $0.04Second
      quarter
            
            0.07
            
            
            0.04Third
      quarter
            
            0.07
            
            
            0.03Fourth
      quarter
            
            0.06
            
            
            0.04




On March
30, 2009, the last reported sales price of our common stock was $0.05. As of
March 30, 2009, there were approximately 1,500 stockholders of record of
our common stock.




Dividends




We have
never declared or paid any cash dividends on our common stock and currently do
not anticipate paying such cash dividends. We currently anticipate that we will
retain all of our future earnings for use in the development and expansion of
our business and for general corporate purposes. Any determination to pay
dividends in the future will be at the discretion of our Board of Directors and
will depend upon our results of operations, financial condition, tax laws and
other factors as the Board of Directors, in its discretion, deems
relevant.





21





Recent
Sales of Unregistered Securities




During
the years ended December 31, 2008 and 2007 the Company made the following
issuances and sales of securities in reliance upon the exemption provided by
Section 4(2) of the Securities Act of 1933, as amended, Rule 506 of Regulation D
hereunder.




During
the year ended December 31, 2007 we issued a total of 9,772,725 shares of common
stock to a director and holder of convertible debentures in the amount of
$500,000 of the Company as conversion of the debentures and accrued interest.
The Company valued the shares at a price of $0.051 per share which was
determined to be fair market value. We relied on Section 4(2) of the Securities
Act.




During
the year ended December 31, 2007 we issued a total of 2,592,938 shares of common
stock as payment for services under a financial advisory contract to an
individual and a corporate entity that this individual controls and owns. The
Company valued the shares at a price of $0.058 per share which was determined to
be fair market value. We relied on Section 4(2) of the Securities
Act.




During
the year ended December 31, 2007 we issued a total of 1,000,000 shares of common
stock as payment pursuant to a settlement with the holder of a mortgage note
payable. The Company valued the shares at a price of $0.05 per share which was
determined to be fair market value. We relied on Section 4(2) of the Securities
Act.




During
the year ended December 31, 2007 we issued a total of 3,307,063 shares of common
stock as payment of accrued interest of $121,733. The Company valued the shares
at a price of $0.037 per share which was determined to be fair market value. We
relied on Section 4(2) of the Securities Act.




During
the year ended December 31, 2007 we issued a total of 40,000 shares of preferred
stock as payment to the holders of a note payable in the amount of $400,000. The
Company valued the shares at a price of $10.00 per share which was determined to
be fair market value. The preferred shares carry discounted conversion rights, a
conditional redemption feature as well as cumulative dividends of 7% per annum.
We relied on Section 4(2) of the Securities Act.




During
the year ended December 31, 2008 we issued a total of 1,000,000 shares of common
stock as payment for services under an investment banking agreement to a
corporate entity. The Company valued the shares at a price of $0.045 per share
which was determined to be fair market value. We relied on Section 4(2) of the
Securities Act.




Repurchase
of Equity Securities




We have
no plans, programs or other arrangements in regards to repurchases of our common
stock.  We however do have an arrangement with regards to our Series A
preferred stock (Preferred Stock). The Company during the year ended December
31, 2007 issued 40,000 shares of Preferred Stock which contains a conditional
(or non-mandatory) redemption feature. The Company at its sole option may
acquire the Preferred Stock at a premium of 115% or $11.50 per share. The
conditionally redeemable feature of our Preferred Stock is based upon the
occurrence of certain future events that are not solely within the control of
the Company. Because the Company does not solely control the occurrence or
non-occurrence of certain market events such as the trading price of its common
stock, redemption of the Preferred Stock is in the opinion of management to be
limited.





22





ITEM 6. Selected Financial Data




The
following selected data should be read in conjunction with our financial
statements located elsewhere in this Annual Report on Form 10-K and is not
required for smaller reporting company disclosures under new Article 8
Regulation S-X.




FIVE
YEAR SELECTED FINANCIAL DATA




(in
      thousands)
            
            2008
            
            
            2007
            
            
            2006
            
            
            2006
            
            
            2004Revenues
            
            $
            1,249
            
            
            $
            2,364
            
            
            $
            3,667
            
            
            $
            5,906
            
            
            $
            7,264Gross
      margin
            
            
            523
            
            
            
            984
            
            
            
            1,524
            
            
            
            2,406
            
            
            
            3,236Net
      income (loss) from operations
            
            
            (1,384
            )
            
            
            (819
            )
            
            
            (168
            )
            
            
            (973
            )
            
            
            (3,401
            )Net
      (loss)
            
            
            (1,386
            )
            
            
            (820
            )
            
            
            (166
            )
            
            
            (974
            )
            
            
            (3,402
            )Earnings
      (loss) from operations per common share:Basic
            
            $
            (0.01
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.05
            )Diluted
            
            $
            (0.01
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.05
            )Net
      income (loss) per share:Basic
            
            $
            (0.01
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.05
            )Diluted
            
            $
            (0.01
            )
            
            $
            (0.01
            )
            
            $
            (0.00
            )
            
            $
            (0.01
            )
            
            $
            (0.05
            )Current
      assets
            
            $
            95
            
            
            $
            212
            
            
            $
            144
            
            
            $
            854
            
            
            $
            2,679Noncurrent
      assets
            
            
            1,258
            
            
            
            1,311
            
            
            
            1,380
            
            
            
            2,693
            
            
            
            2,764Current
      liabilities
            
            
            2,158
            
            
            
            1,699
            
            
            
            2,148
            
            
            
            5,818
            
            
            
            6,651Noncurrent
      liabilities
            
            
            1,761
            
            
            
            949
            
            
            
            918
            
            
            
            704
            
            
            
            888Total
      stockholders’ equity (deficit)
            
            $
            (2,566
            )
            
            $
            (1,125
            )
            
            $
            (1,542
            )
            
            $
            (2,975
            )
            
            $
            (2,096
            )







ITEM
7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations




OVERVIEW




We are in
the business of providing real estate and mortgage financial
services primarily for transactions involving sales, purchases or financing
of residential properties. Our business is conducted through three
wholly-owned subsidiaries, Discover Mortgage Corporation and TCS Mortgage,
Inc. which operate in the mortgage brokerage and mortgage banking business;
and WHY USA North America Inc. which operates in the real estate franchise
business. Our primary mission is to develop and provide professional
residential real estate and mortgage banking services and support both to
our network of franchise real estate brokers and their customers and to new
home, resale home and refinancing mortgage borrowers dealing directly with
our mortgage lending offices.




We
conduct our business through two principal segments:




Ø
            Real Estate Franchise (REF).The Company’s REF operations are conducted regionally within the
      United States; Upper Midwestern states as well as several other states
      with limited franchise areas.






Ø
            Mortgage Broker and
      Originations (MB). The Company’s MB operations are conducted
      regionally within the United States; Upper Midwestern states as well as
      the Southwest (which includes Southern California and
    Nevada).




The
Company has incurred significant losses, and as of December 31, 2008 had an
accumulated deficit of approximately $12.7 million. The Company intends to
expend considerable financial and management resources on sales and marketing,
development of additional financial service offerings, strategic acquisitions
and alliances, and expanded operations to support larger-scale business
operations. Accordingly, the Company may continue incurring losses incident to
future growth. There can be no assurance that the Company's revenues will
increase to the levels necessary to achieve profitability or generate enough
cash from operations in the future.


23





The
Company's prospects must also be considered in light of the risks, difficulties,
and expenses frequently encountered by companies in their early stage of
development, particularly companies in rapidly changing markets such as ours. To
address these risks, the Company must, among other things, maintain existing,
and develop new relationships with mortgage lenders, real estate brokers and
franchisees, and potential residential customers in the general public;
implement and successfully execute its business and marketing strategy; continue
to develop and upgrade transaction-processing systems; provide quality customer
service; respond to competitive developments; and attract, retain and motivate
qualified personnel. There can be no assurance the Company will be successful in
addressing such risks, and the failure to do so would harm the Company's
business, financial condition, and results of operations. The Company's current
and future expense levels are based on its planned operations and estimates of
future revenues. Revenue and operating results generally depend upon the volume
and timing of mortgages originated and real estate closings completed, which are
rather difficult to forecast. The Company may be unable to adjust spending in a
timely manner to compensate for any unexpected revenue shortfalls. Any
significant shortfall of revenue would have an immediate adverse effect on the
Company's business. In view of the changing nature of both the financial
services industry and the overall national economy, the Company is unable to
accurately forecast its revenue. Accordingly, we believe that period-to-period
comparisons of our operating results are not very meaningful and should not be
relied upon as an indication of future performance.




The
Company's material sources of revenue in order of priority are from: (1)
mortgage origination and related mortgage lending fees, (2) WHY USA franchise
fees/royalties received from our franchisees based on their ongoing business,
(3) new franchise sales, and (4) real estate sales commissions.




RESULTS
OF OPERATIONS




Comparison
of Years Ended December 31, 2008 and 2007




Revenues




Net
revenues decreased $1.1 million or 47% for 2008 compared to 2007. The decrease
was a result of the significant softening of the mortgage business as well as
the real estate industry. The 2008 summer was a time of great turmoil for the
financial services industry. WHY USA, fortunately, was not in the business of
sub-prime single-family residential mortgages, so the Company was not exposed to
the disruption in the market. However, the general market experienced a ripple
effect that business both in mortgage and real estate transactions almost ceased
to exist. It is important to note that the Company continued to maintain the
highest underwriting standards in our loan portfolio, regardless of the loan
type, a decision that is part of its core business philosophy. By maintaining
historically excellent credit standards, the Company was able to focus on
providing high levels of customer service and expanding its product offerings in
spite of these difficult market conditions.




Over the
prior two years it was readily apparent that the sub-prime mortgage market
continues to be strained which in turn affected the overall financial services
industry. As a mortgage broker, WHY USA and its business practices did not
have any specific exposure to the sub-prime market, no liability to purchase
defaulted loans. As a result, management believes that even though the sub-prime
market has ceased to exist, the negative impact from the sub-prime market
fallout continues to affect future revenues. Given that we continue to work
on stabilizing ourselves the weakened sub-prime market, revenues continued
to decrease for 2008, even though we are experiencing a growing demand and need
for FHA insured loans. The purpose of the FHA insured program is to allow
non- Fannie Mae and Freddie Mac approved borrowers’ access to non sub-prime
loan programs. Therefore we are experiencing an increase of the “Government”
sponsored loan programs that allow more flexible lending criteria, picking up
much of the slack in the traditional “sub-prime” loans.




Real
Estate Franchise (REF). Real Estate Franchise revenues decreased $0.05 million
or 27% for 2008 compared to 2007. The decrease was due to the significant real
estate market softening and our franchisees experiencing a limited revenue cycle
as well.




Mortgage
Brokerage (MB). MB revenues decreased $1.1 million or 49% for 2008 compared to
2007. The decrease was a result of decreased volume in mortgage revenue of $1.0
million along with a decrease in non-franchise real estate services of $0.1
million. The sub-prime effect has been burdensome to both the mortgage industry
as well as the real estate industry as a whole.





24





Cost
of Revenues




Cost of
revenues decreased $0.7 million or 47% for 2008 compared to 2007. Cost of
revenues dropped relative to our decrease in net revenues for the year. Costs of
revenue which consists of primarily direct costs associated with our products
and services, was affected by the sub-prime and financial services market
weakening. Commission expense and direct costs continue to remain constant as a
percentage with some slight cost savings due to competitive nature. Cost of
revenues as a percentage of net revenues remained relatively constant at 58% for
2008 and 2007. Gross margin remained relatively constant at 42% for 2008 and
2007.




Real
Estate Franchise (REF). REF cost of revenues decreased $0.004 million or 11.2%
for 2008 compared to 2007 primarily due to lower direct costs, offering of
limited services and other cost saving efforts.




Mortgage
Brokerage (MB). MB cost of revenues decreased $0.7 million or 48% for 2008
compared to 2007. Declines in cost of revenues were primarily the result of the
decline in service revenue and the associated costs needed to complete the loan
transactions.




Operating
Expenses




Selling,General and Administrative.For 2008, selling, general and administrative expenses decreased $0.1
million or 5% compared to 2007. The decrease resulted primarily from several
cost savings initiatives which include staffing and salary reductions along
with reductions in employee benefits, professional services, occupancy
costs, and other expenses.




Depreciation and
Amortization. Depreciation and
amortization for 2008 decreased $0.01 million or 27% compared to 2007. The
decrease resulted primarily from disposition of non-core assets as well as
reaching maturity level on some of our assets. Depreciation and amortization
expense for 2008 was $0.04 million which was primarily associated with our MB
business segment. The Company’s fixed asset base has stabilized or decreased
slightly since our acquisition of TCS.




Impairment of Long-Lived
Assets. Impairment of long-lived assets for 2008 was $0.06
million, compared to $0.03 million in 2007. This decrease is directly
caused by the change in carrying value of the Company’s property located in
Minneapolis, Minnesota. Impairment was recognized in accordance with the
requirements of SFAS 142.




Other
Income (Expense)




Interest Expense. Interest
expense was $0.2 million for 2008 compared to $0.2 million for 2007. The Company
remained relatively stable in its incurring of interest expense on its debt. The
Company negotiated some of its prior debt obligations and increased its debt
during the year, however these changes hold interest expense
stable.




Gain on Extinguishment of
Debt. Gain
on extinguishment of debt was none for 2008 compared to $0.5 million for
2007. Gain on extinguishment of debt for 2007 was comprised of accrued interest
forgiven on $400,000 in notes payable that were converted into equity of the
Company at the end of the year.




The
likelihood of continued gains on extinguishment of debt is negligible as the
Company has converted, exchanged or tendered debt in the amount $4.6 million
during the past five years.




Other Income (Expense), Net.
Other income (expense), net, for 2008 and 2007 was nil and $0.1 million,
respectively. For 2007 the Company received payment on a settlement of insurance
holdings that it had from a previously acquired business. This settlement
benefit was a one-time event for the Company and was approximately $0.1
million.





25





Provision for Income Taxes.The provision for income taxes is the $800 minimum franchise tax due for
each of the Company’s two wholly-owned subsidiaries that conduct business in the
state of California. The Company has sufficient net operating losses to offset
any income for a period of time.




Comparison
of Years Ended December 31, 2007 and 2006




Revenues




Net
revenues decreased $1.3 million or 36% for 2007 compared to 2006. The decrease
was a result of the significant softening of the mortgage business as well as
the real estate industry. The 2007 summer was a time of great turmoil for the
financial services industry. WHY USA was not in the business of sub-prime
single-family residential mortgages, so the Company was not exposed to the
disruption in the market. However, the general market experienced a ripple
effect that business both in mortgage and real estate transactions almost ceased
to exist. It is important to note that the Company continued to maintain the
highest underwriting standards in our loan portfolio, regardless of the loan
type, a decision that is part of its core business philosophy. By maintaining
historically excellent credit standards, the Company was able to focus on
providing high levels of customer service and expanding its product offerings in
spite of these difficult market conditions.




Real
Estate Franchise (REF). Real Estate Franchise revenues decreased $0.07 million
or 29% for 2007 compared to 2006. The decrease was due to the significant real
estate market softening and our franchisees experiencing a limited revenue cycle
as well.




Mortgage
Brokerage (MB). MB revenues decreased $1.2 million or 36% for 2007 compared to
2006. The decrease was a result of decreased volume in mortgage revenue of $1.0
million along with a decrease in non-franchise real estate services of $0.2
million. The sub-prime effect has been burdensome to both the mortgage industry
as well as the real estate industry as a whole.




Cost
of Revenues




Cost of
revenues decreased $0.8 million or 36% for 2007 compared to 2006. Cost of
revenues dropped relative to our decrease in net revenues for the year. Costs of
revenue which consists of primarily direct costs associated with our products
and services, was affected by the sub-prime and financial services market
weakening. Commission expense and direct costs continue to remain constant as a
percentage with some slight cost savings due to competitive nature. Cost of
revenues as a percentage of net revenues remained relatively constant at 58% for
2007 and 2006. Gross margin remained relatively constant at 42% for 2007 and
2006.




We
believe that gross margin for future periods may be affected by, among other
things, the integration of acquired businesses in addition to increased
services, competitive conditions, our ability to make additional productivity
improvements and the acceptance of government products as a replacement for
non-government products.




Real
Estate Franchise (REF). REF cost of revenues decreased $0.02 million or 36% for
2007 compared to 2006 primarily due to lower direct costs, offering of limited
services and other cost saving efforts.




Mortgage
Brokerage (MB). MB cost of revenues decreased $0.7 million or 36% for 2007
compared to 2006. Declines in cost of revenues were primarily the result of the
decline in service revenue and the associated costs needed to complete the
transactions.




Operating
Expenses




Selling,General and Administrative.For 2007, selling, general and administrative expenses decreased $0.5
million or 22% compared to 2006. The decrease resulted primarily from several
cost savings initiatives which include staffing and salary reductions along
with reductions in employee benefits, professional services, occupancy
costs, and other expenses.





26





We
continue to pursue programs and initiatives to improve our efficiency in the
general and administrative area. These programs focus in the areas of process
improvement and automation relative to our mortgage and non-franchise real
estate business and its support as well as support services needed for our
holding company. We expect over time that these actions will result in
additional declines in our general and administrative expenses as a percent of
revenues.




Depreciation and
Amortization. Depreciation and
amortization for 2007 decreased $0.01 million or 20% compared to 2006. The
decrease resulted primarily from disposition of non-core assets as well as
reaching maturity level on some of our assets. Depreciation and amortization
expense for 2007 was $0.05 million which was primarily associated with our MB
business segment. The Company’s fixed asset base has stabilized or decreased
slightly since our acquisition of TCS.




Impairment of Long-Lived
Assets. Impairment of long-lived assets for 2007 was $0.03
million, compared to $0.2 million in 2006. This decrease is directly caused
by the change in carrying value of the Company’s property located in
Minneapolis, Minnesota. Impairment was recognized in accordance with the
requirements of SFAS 142.




Other
Income (Expense)




Interest Income. Interest
income was nil in 2007 compared to $0.1 million in 2006. The $0.1 million
decrease resulted primarily from the Company’s decrease in invested cash
balances from its lines as well as loans-held for resale being eliminated or
retired.




Interest Expense. Interest
expense was $0.2 million for 2007 compared to $0.4 million for 2006. The primary
reason for the $0.2 million reduction in interest expense was the payment or
conversion of several convertible debentures during 2007 and the sale or
disposition of the two Woodbury properties later explained within this
report.




Gain on Extinguishment of
Debt. Gain
on extinguishment of debt was $0.05 million for 2007 compared to $1.2 million
for 2006. Gain on extinguishment of debt for 2007 was comprised of accrued
interest forgiven on $400,000 in notes payable converted into equity of the
Company at the end of the year. Gain on extinguishment of debt for 2006 was
comprised of accrued interest, termination fees and other expenses along with
the reduced cash payment of the $1.3 million note payable and the sheriff’s sale
disposition of the two Woodbury properties along with three debt instruments.
The settlement of these obligations along with the carrying value of the
underlying assets created one time gains totaling $0.8 million for the
settlement of the note payable for less than its principal value, and $0.5
million for the disposition of the mortgage notes payable associated with two
Woodbury properties.




The
likelihood of continued gains on extinguishment of debt is negligible as the
Company has converted, exchanged or tendered debt in the amount $4.6 million
during the past four years.




Other Income (Expense), Net.
Other income (expense), net, for 2007 and 2006 was $0.1 million and $0.03
million, respectively. For 2007 the Company received payment on a settlement of
insurance holdings that it had from a previously acquired business. This
settlement benefit is a one-time event for the Company and was approximately
$0.1 million.




Provision for Income Taxes.The provision for income taxes is the $800 minimum franchise tax due for
each of the Company’s two wholly-owned subsidiaries that conduct business in the
state of California. The Company has sufficient net operating losses to offset
any income for a period of time.




LIQUIDITY
AND CAPITAL RESOURCES




Operating Activities.
Operating activities used net cash of $0.7 million during 2008 primarily from a
net loss of $1.4 million offset by net non-cash charges of $0.1 million. Changes
in operating assets and liabilities provided a net increase of $0.6 million in
cash during the period. Within the non-cash charges, the primary drivers were
share based compensation of $0.1 million. The primary drivers of cash usage from
changes in operating assets and liabilities was an decrease in prepaid and other
assets of $0.1 million, increases in accounts payable and accrued expenses of
$0.5 million which were partially offset by a increase in trade receivables of
$0.1 million.





27





As a
result of working capital improvement and cost reduction programs, we expect to
utilize our working capital more effectively in the future resulting in our
ability to reinvest in activities that will increase the Company’s presence in
the marketplace. Our working capital factors, such as accounts receivable
collection and payables, are seasonal and, on an interim basis during the year,
may require an influx of short-term working capital.




Investing Activities. Net cash
used in investing activities during 2008 was $65,049. The primary use of cash of
$0.1 million was used for investment in equipment purchases for our new
office space of approximately $15,000 as well as $50,000 that was placed in a
certificate of deposit with an FDIC insured institution which secures the
Company’s letter of credit with the state of Minnesota licensing authority. This
letter of credit enables the Company to provide correspondent lending service
for the Minnesota area through our subsidiary Discover.




For 2009,
we expect spending for capital equipment and information technology to
approximate 2008 spending.




Financing Activities. Net cash
provided by financing activities totaled $0.8 million for 2008 and includes $0.9
million in proceeds from several convertible debentures entered into by one of
our directors, offset by the payment of existing debt of $0.1 million. Of the
payments on existing debt the Company made final payment on its arbitrated
settlement of $55,000 to a former mortgage note holder.




We
continue to seek acquisition opportunities that support our Real Estate
Franchise and Mortgage Brokerage platforms. While we cannot predict the timing
or size of any future acquisitions, or if any will occur at all, a significant
amount of our cash and/or stock may be used to acquire companies, assets or
technologies. We could also choose to fund any acquisitions, at least partly,
with new debt or stock.




As of
December 31, 2008, we had cash and cash equivalents of approximately
$53,000. Our working capital deficit was $2.0 million as of December 31,
2008. This includes along with accounts payable outstanding, bank line of credit
of $0.1 million, short term debt and lease obligations of $0.6 million, as well
as accrued expense and other of $1.0 million. Cash used in operations primarily
comes from our service offerings with non-recurring expenses funded through the
issuance of convertible debentures.




The
Company and its compensation committee have discussed the option of making full
and final payment on the past due compensation of its executive officer, Mr.
James Kylstad. As of December 31, 2008, the Company was obligated to Mr. Kylstad
in the amount of $709,950 for his past services. The Company believes that prior
to December 31, 2009, this obligation owed to Mr. Kylstad will be paid in full
and/or renegotiated.




We expect
that our current cash and cash equivalents, short-term and long-term
investments, short-term borrowings and/or the raising of additional capital,
along with funds from operations and interest income earned thereon will be
sufficient to fund our current operations through at least the first quarter of
2010. Our future capital requirements and the adequacy of our available funds
will depend on many factors, including future business acquisitions, our ability
to establish collaborative business arrangements, the cost involved in
preparing, filing, prosecuting, maintaining and enforcing business claims and
competing technological and market developments.




Furthermore,
we believe that the Company can raise adequate capital to keep the Company
functioning through December 31, 2009. We believe that sufficient funding can be
secured through the use of its convertible debentures, as well as offerings of
preferred and common stock through private placements to institutional and other
finance sources. However, no assurance can be given that the Company can obtain
additional working capital, or if obtained, that such funding will not cause
substantial dilution to shareholders of the Company. If the Company is unable to
raise additional funds, it may be forced to change or delay its contemplated
expansion and business plan.





28





Summary
Cash Flow Operating, Investing and Financing Activities for the year ended
December 31, 2007




Operating
activities used net cash of $0.3 million during 2007 primarily from a net loss
of $0.8 million offset by net non-cash charges of $0.6 million. Changes in
operating assets and liabilities provided a net decrease of $0.1 million in cash
during the period. Within the non-cash charges, the primary drivers were share
based compensation of $0.2 million. The primary drivers of cash usage from
changes in operating assets and liabilities was an increase in prepaid
and other assets of $0.1 million, decreases in accounts payable and accrued
expenses of $0.2 million which were partially offset by a decrease in trade
receivables of $0.1 million.




As a
result of working capital improvement and cost reduction programs, we expect to
utilize our working capital more effectively in the future resulting in our
ability to reinvest in activities that will increase the Company’s presence in
the marketplace. Our working capital factors, such as accounts receivable
collection and payables, are seasonal and, on an interim basis during the year,
may require an influx of short-term working capital.




Net cash
used in investing activities during 2007 was negligible. The primary use of cash
was for the purchases of property plant and equipment of approximately
$6,000.




Net cash
provided by financing activities totaled $0.3 million for 2007 and includes $0.9
million provided by the refinance of our Minneapolis property, offset by the
payment of the existing debt of $0.6 million. For 2007 we received $0.3
million in proceeds from a convertible debenture entered into by one of our
directors of which they later converted into common stock of Company along with
other convertible debentures held.




The
Company during the year ended December 31, 2007 entered into an equity exchange
with Quality Investments, Inc. and Wild Rose Partners, LLLP (the successor to
Law Investments, Inc.) who collectively owned a $400,000 note payable that was
in default. Both Wild Rose Partners LLP and Quality Investments, Inc. tendered
the outstanding principal and accrued interest in exchange for a combination of
common stock and preferred stock. The note payable was exchanged for 40,000
shares of preferred stock of the Company with a purchase price of $10 per share.
Accrued interest due of $121,733 was tendered in exchange for 3,307,063 shares
of common stock. Wild Rose Partners LLLP and Quality Investments, Inc. waived
the default interest that would have been due on the note payable.




CONTRACTUAL
OBLIGATIONS




The
following table summarizes our contractual obligations at December 31, 2008
and the effect such obligations are expected to have on our liquidity and cash
flows in future periods.




Payments Due by Period(in
      thousands)
            
            Total
            
            Less than
              1 Year
            
            Years
              2-3
            
            Years
              4-5
            
            More than 5
              Years
            
            All OtherLong-term
      debt(1)
            
            $
            2,350,773
            
            
            $
            590,901
            
            
            $
            1,759,872
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -Capital
      lease obligations
            
            
            3,128
            
            
            
            2,392
            
            
            
            736
            
            
            
            -
            
            
            
            -
            
            
            
            -Operating
      lease obligations
            
            
            82,089
            
            
            
            46,908
            
            
            
            35,181
            
            
            
            -
            
            
            
            -
            
            
            
            -Total
            
            $
            2,435,990
            
            
            $
            640,201
            
            
            $
            1,795,789
            
            
            $
            -
            
            
            $
            -
            
            
            $
            -





CRITICAL
ACCOUNTING POLICIES




Segment
Information




The
Company operates in two segments: Real Estate Franchise (REF) and Mortgage
Brokerage (MB). The Company has no intersegment revenues that are material to
the overall consolidated financial statements. The Company does not currently
segregate assets by segment as a majority of the Company’s total assets are
shared or considered non-segment assets which are segregated as “corporate.” The
Company has determined that it is not useful to assign its shared assets to
individual segments. Based on the aggregation criteria of Statement of Financial
Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information, (SFAS 131) the Company’s service
offerings in the MB segment share similar economic characteristics, but are
different from the economic characteristics of the service offerings of our REF
segment. As a result of using the aggregation guidelines under SFAS 131, there
is no logical subgrouping of service offerings within either the MB or REF
segments.


29





Impairment
of Goodwill




Goodwill
represents the excess purchase price of net tangible and intangible assets
acquired in business combinations over their estimated fair value. Goodwill is
allocated to the Company’s segments based on the nature of the product line of
the acquired entity. In accordance with Statement of Financial Accounting
Standards No. 141, “Business Combinations” (SFAS 141) and Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (SFAS 142), goodwill is tested for impairment on an annual basis and
earlier if there is an indicator of impairment. Furthermore, SFAS 142 requires
purchased intangible assets other than goodwill to be amortized over their
useful lives unless these lives are determined to be indefinite.




The
Company performs its goodwill impairment tests annually during the fourth
quarter of its fiscal year and earlier if an event or circumstance indicates
that impairment has occurred. During the years ended December 31, 2008 and 2007,
we determined that it was necessary to evaluate goodwill for impairment between
annual tests, in accordance with SFAS 142. The evaluation between annual
testing dates was due to the deteriorating conditions in certain housing markets
and the significant reduction in loans being funded during those years. The
process of evaluating goodwill for impairment involves the determination of the
fair value of our reporting units. Inherent in such fair value determinations
are certain judgments and estimates relating to future cash flows, including our
interpretation of current economic indicators and market valuations, and
assumptions about our strategic plans with regard to our operations. Due to the
uncertainties associated with such estimates, actual results could differ from
such estimates.  Goodwill associated with our reporting unit is
determined by that fair value of the building owned by the reporting unit. We
estimate the fair value of the building by obtaining an appraisal each year
which occurs during the winter months (which corresponded to our refinancing in
2007). This appraisal provides management with a realistic fair value during a
period which activities for like-kind property sales are at its lowest. In
addition the Company utilized a combination of valuation methods including a
discounted cash flow analysis and the guideline companies’ method to estimate
the fair value of the reporting unit. Based on this analysis, the Company
determined that impairment did exist, and as a result, an impairment charge was
recorded during the year which coincided with the 4th quarter
of 2007 and 2008, respectively.




Goodwill
is attributable to the acquisition of Discover. The Company in connection with
the acquisition of Discover recorded goodwill of $1,016,570. The Company
recorded impairment losses of $55,787 and $32,787 for the years ended December
31, 2008 and 2007, respectively, to reflect goodwill impairment on the
acquisition of Discover and the fair value of the building acquired in the
acquisition.




As of
December 31, 2008 goodwill associated with the Discover acquisition is recorded
at $729,028.




Revenue
Recognition




Revenue
from loan originations are recognized at the time the mortgage loan closes or is
funded. The majority of revenue receivables are collected within five business
days. Real estate transaction fees are recognized at the closing of a real
estate transaction by a franchisee. The Company does not service a loan
portfolio and resells all of the loans it originates.




In
accordance with Financial Accounting Standard No. 45, the Company defers the
recognition of new franchise sales until the commencement of operations by the
new franchisee. The new franchisee opens his real estate sales office in his
“protected” territory and receives training and marketing support, real estate
documents and other sales aids from the Company. These activities generally
occur within one month of the purchase of the franchise. All costs, services and
conditions related to new franchise sales have been incurred or performed prior
to the recognition of income from new franchise sales.





30





Accounting
for Share-Based Compensation




The
Company accounts for share based compensation using Statement of Financial
Accounting Standards No. 123 (revised 2004),Share-Based Payment(SFAS
123R) using the modified-prospective-transition method. Under this method,
share-based compensation cost is measured at the grant date based on the
estimated fair value of the award and is recognized as expense over the
employee’s requisite service period for all share-based awards granted, modified
or cancelled as of January 1, 2006.




RECENT
ACCOUNTING PRONOUNCEMENTS




For
information on the recent accounting pronouncements impacting our business, see
Note 1 of the notes to consolidated financial statements included in
Item 8.




ITEM
7A. Quantitative and Qualitative Disclosures About Market Risk




Not
required for smaller reporting company disclosures under new Article 8
Regulation S-X.







31





ITEM 8. Financial Statements and
Supplementary Data










Report of
Independent Registered Public Accounting Firm




Board of
Directors and Stockholders


Why
USA Financial Group, Inc.




We have
audited the accompanying consolidated balance sheets of Why USA Financial Group, Inc.
as of December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity (deficit), and cash flows for the years then
ended.  These consolidated financial statements are the responsibility
of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.




We have
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material
misstatement.  The Company is not required to have, nor were we
engaged to perform, an audit of its internal controls over financial reporting.
Our audits included consideration of internal controls over financial reporting
as a basis for designing audit procedures that are appropriate in the
circumstance, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the consolidated
financial statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audits provide a reasonable basis for our opinion.




In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Why USA Financial Group, Inc.
as of December 31, 2008 and 2007, and the consolidated results of their
operations and their cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of
America.




As
discussed in Note 11, to the consolidated financial statements, the Company
adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income
Taxes,” as of January 1, 2007.





/s/ PKFSan
      Diego California
            PKFMarch
      27, 2009
            Certified
      Public AccountantsA
      Professional Corporation








32





WHY
USA FINANCIAL GROUP, INC.


Consolidated
Balance Sheets


As
of December 31, 2008 and 2007




December
      31, 2008
            
            
            December
      31, 2007ASSETSCURRENT
      ASSETS:Cash
      and cash equivalents
            
            $
            52,921
            
            
            $
            46,176Accounts
      receivables, net of allowance for doubtful accounts
            
            
            18,771
            
            
            
            59,325Prepaid
      assets and other  assets
            
            
            22,823
            
            
            
            106,287Total
      current assets
            
            
            94,515
            
            
            
            211,788PROPERTY
      AND EQUIPMENT—Net
            
            
            479,223
            
            
            
            497,484GOODWILL
            
            
            729,028
            
            
            
            784,815RESTRICTED
      CASH
            
            
            50,000
            
            
            
            -OTHER
      NONCURRENT ASSETS
            
            
            -
            
            
            
            29,226TOTAL
            
            $
            1,352,766
            
            
            $
            1,523,313LIABILITIES
      AND STOCKHOLDERS’ EQUITY (DEFICIT)CURRENT
      LIABILITIES:Warehouse
      and bank lines
            
            $
            97,570
            
            
            $
            99,789Current
      portion of obligation under capital leases
            
            
            2,392
            
            
            
            1,538Current
      portion of notes payable and convertible debentures
            
            
            544,767
            
            
            
            473,319Current
      portion of mortgage notes payable
            
            
            36,112
            
            
            
            88,427Bank
      overdraft
            
            
            2,066
            
            
            
            -Accounts
      payable
            
            
            499,649
            
            
            
            347,174Accrued
      expense and other liabilities
            
            
            975,890
            
            
            
            689,187Total
      current liabilities
            
            
            2,158,446
            
            
            
            1,699,434MORTGAGE
      NOTES PAYABLE
            
            
            809,672
            
            
            
            839,307NOTES
      PAYABLE AND CONVERTIBLE DEBENTURES
            
            
            950,200
            
            
            
            110,000OBLIGATIONS
      UNDER CAPITAL LEASES
            
            
            736
            
            
            
            -Total
      liabilities
            
            $
            3,919,054
            
            
            $
            2,648,741COMMITMENTS
      AND CONTINGENCIESSTOCKHOLDERS’
      EQUITY (DEFICIT):Common
      stock, $.001 par value, 250,000,000 shares authorized;108,268,022
      and 108,992,160 shares issued and outstanding for 2008 and 2007,
      respectively
            
            
            108,269
            
            
            
            108,993Additional
      paid in capital
            
            
            10,005,408
            
            
            
            10,059,684Preferred
      Stock, $.01 par value, 50,000,000 shares authorized;40,000
      shares issued and outstanding for 2008 and 2007,
    respectively
            
            
            400
            
            
            
            400Accumulated
      deficit
            
            
            (12,680,365
            )
            
            
            (11,294,505
            )Total
      stockholders’ equity (deficit)
            
            
            (2,566,288
            )
            
            
            (1,125,428
            )TOTAL
            
            $
            1,352,766
            
            
            $
            1,523,313See
      accompanying notes to consolidated financial statements.





33





WHY
USA FINANCIAL GROUP, INC.


Consolidated
Statements of Operations


For
the Years Ended December 31, 2008 and 2007





December
      31, 2008
            
            
            December
      31, 2007NET
      REVENUES
            
            $
            1,249,413
            
            
            $
            2,363,929COST
      OF REVENUES
            
            
            725,929
            
            
            
            1,379,800Gross
      margin
            
            
            523,484
            
            
            
            984,129SELLING,
      GENERAL AND ADMINISTRATIVE EXPENSES
            
            
            1,605,567
            
            
            
            1,698,289DEPRECIATION
      AND AMORTIZATION EXPENSE
            
            
            35,042
            
            
            
            48,227IMPAIRMENT
      OF GOODWILL
            
            
            55,787
            
            
            
            32,787OPERATING
      LOSS
            
            
            (1,172,912
            )
            
            
            (795,174
            )OTHER
      INCOME (EXPENSE):Interest
      expense
            
            
            (212,321
            )
            
            
            (205,121
            )Interest
      income
            
            
            803
            
            
            
            127Gain
      on extinguishment of debt
            
            
            -
            
            
            
            49,867Other
      income
            
            
            170
            
            
            
            131,580Total
      other income (expense)
            
            
            (211,348
            )
            
            
            (23,547
            )LOSS
      FROM OPERATIONS
            
            
            (1,384,260
            )
            
            
            (818,721
            )Income
      tax expense
            
            
            (1,600
            )
            
            
            (1,600
            )NET
      LOSS
            
            $
            (1,385,860
            )
            
            $
            (820,321
            )BASIC
      LOSS PER SHARE:Net
      loss
            
            $
            (0.01
            )
            
            $
            (0.01
            )DILUTED
      LOSS PER SHARE:Net
      loss
            
            $
            (0.01
            )
            
            $
            (0.01
            )WEIGHTED
      AVERAGE SHARES USED :Basic
            
            
            108,349,919
            
            
            
            98,200,412Diluted
            
            
            108,349,919
            
            
            
            98,200,412See
      accompanying notes to consolidated financial statements.





34





WHY
USA FINANCIAL GROUP, INC.


Consolidated
Statements of Stockholders' Equity (Deficit)


For
the Years Ended December 31, 2008 and 2007






Common
      Stock
            
            
            Preferred
      Stock
            
            
            Accumulated
      Deficit
            
            
            Total
      Stockholders' Equity (Deficit)Shares
            
            
            Amount
            
            
            Additional
      Paid in Capital
            
            
            Shares
            
            
            AmountBALANCE—December
      31, 2006
            
            
            92,319,434
            
            
            $
            92,320
            
            
            $
            8,839,933
            
            
            
            -
            
            
            $
            -
            
            
            $
            (10,474,184
            )
            
            $
            (1,541,931
            )Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (820,321
            )
            
            
            (820,321
            )Issuance
      of common stock in connection with conversionof notes payable and
      accrued interest
            
            
            9,772,725
            
            
            
            9,773
            
            
            
            504,945
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            514,718Issuance
      of common stock as payment for services
            
            
            2,592,938
            
            
            
            2,593
            
            
            
            147,780
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            150,373Issuance
      of preferred stock in connection with conversionof notes
      payable
            
            
            -
            
            
            
            -
            
            
            
            399,600
            
            
            
            40,000
            
            
            
            400
            
            
            
            -
            
            
            
            400,000Issuance
      of common stock in connection with conversionof accrued
      interest
            
            
            3,307,063
            
            
            
            3,307
            
            
            
            118,426
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            121,733Issuance
      of common stock upon warrant conversion
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            49,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            50,000BALANCE—December
      31, 2007
            
            
            108,992,160
            
            
            
            108,993
            
            
            
            10,059,684
            
            
            
            40,000
            
            
            
            400
            
            
            
            (11,294,505
            )
            
            
            (1,125,428
            )Net loss
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (1,385,860
            )
            
            
            (1,385,860
            )Cancellation
      of common stock, non-performance of services
            
            
            (1,724,138
            )
            
            
            (1,724
            )
            
            
            (98,276
            )
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            (100,000
            )Issuance
      of common stock as payment for services
            
            
            1,000,000
            
            
            
            1,000
            
            
            
            44,000
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            45,000BALANCE—December
      31, 2008
            
            
            108,268,022
            
            
            $
            108,269
            
            
            $
            10,005,408
            
            
            
            40,000
            
            
            $
            400
            
            
            $
            (12,680,365
            )
            
            $
            (2,566,288
            )See
      accompanying notes to consolidated financial statements.




35





WHY
USA FINANCIAL GROUP, INC.


Consolidated
Statement of Cash Flows


For
the Years Ended December 31, 2008 and 2007


December
      31, 2008
                  
                  
                  December
      31, 2007CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss from continuing operations
                  
                  $
                  (1,385,860
                  )
                  
                  $
                  (820,321
                  )Adjustments
      to reconcile net loss to net cash (used in) provided by operating
      activities:Depreciation
      and amortization
                  
                  
                  35,042
                  
                  
                  
                  48,227Stock
      compensation expense
                  
                  
                  (55,000
                  )
                  
                  
                  150,373Gain
      on forgiveness/cancellation of debt
                  
                  
                  -
                  
                  
                  
                  (49,867
                  )Impairments
      of long-lived assets
                  
                  
                  55,787
                  
                  
                  
                  32,787Forgiveness
      of notes receivable/accrued interest
                  
                  
                  -
                  
                  
                  
                  20,000Provision
      for (benefit from) doubtful accounts
                  
                  
                  87,898
                  
                  
                  
                  (47,955
                  )Effect
      of changes in operating assets and liabilities:Trade
      receivables
                  
                  
                  (47,344
                  )
                  
                  
                  91,145Prepaid
      expenses and other current assets
                  
                  
                  83,464
                  
                  
                  
                  (79,189
                  )Accounts
      payable
                  
                  
                  152,475
                  
                  
                  
                  (21,483
                  )Accrued
      expenses and other liabilities
                  
                  
                  298,703
                  
                  
                  
                  167,258Other
      noncurrent assets
                  
                  
                  31,910
                  
                  
                  
                  (6,151
                  )Net
      cash used in operating activities
                  
                  
                  (742,925
                  )
                  
                  
                  (515,176
                  )CASH
      FLOWS FROM INVESTING ACTIVITIES:Purchases
      of property and equipment
                  
                  
                  (15,049
                  )
                  
                  
                  (5,989
                  )Purchase
      of certificate of deposit (restricted cash)
                  
                  
                  (50,000
                  )
                  
                  
                  -Net
      cash used in investing activities
                  
                  
                  (65,049
                  )
                  
                  
                  (5,989
                  )CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      (payments) on revolving credit facility, netof mortgages held for
      resale
                  
                  
                  (2,219
                  )
                  
                  
                  215Proceeds
      from mortgages payable
                  
                  
                  -
                  
                  
                  
                  875,000Repayments
      of mortgages payable
                  
                  
                  (81,950
                  )
                  
                  
                  (626,707
                  )Repayment
      of notes payable and convertible debentures
                  
                  
                  (552
                  )
                  
                  
                  (1,907
                  )Proceeds
      from notes payable and convertible debentures
                  
                  
                  900,200
                  
                  
                  
                  312,500Repayment
      of obligations under capital leases
                  
                  
                  (2,826
                  )
                  
                  
                  (6,027
                  )Bank
      overdraft
                  
                  
                  2,066
                  
                  
                  
                  -Net
      cash provided by financing activities
                  
                  
                  814,719
                  
                  
                  
                  553,074NET
      INCREASE IN CASH AND CASH EQUIVALENTS
                  
                  
                  6,745
                  
                  
                  
                  31,909CASH
      AND CASH EQUIVALENTS—Beginning of year
                  
                  
                  46,176
                  
                  
                  
                  14,267CASH
      AND CASH EQUIVALENTS—End of year
                  
                  $
                  52,921
                  
                  
                  $
                  46,176SUPPLEMENTAL
      DISCLOSURES OF CASH FLOW INFORMATION:Cash
      paid for taxes
                  
                  $
                  1,600
                  
                  
                  $
                  1,600Cash
      paid for interest
                  
                  $
                  97,275
                  
                  
                  $
                  68,529Noncash
      transactions—Notes
      payable and accrued interest tendered in exchange for
    equity
                  
                  $
                  -
                  
                  
                  $
                  521,733Issuance
      of common stock as settlement payment
                  
                  $
                  -
                  
                  
                  $
                  50,000Convertible
      debentures tendered
                  
                  $
                  -
                  
                  
                  $
                  514,718Capital
      lease obligations
                  
                  $
                  4,416
                  
                  
                  $
                  -Notes
      issued for prior services
                  
                  $
                  12,000
                  
                  
                  $
                  -See
      accompanying notes to consolidated financial statements.





36





WHY USA
FINANCIAL GROUP, INC. AND SUBSIDIARIES


NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS


For the
Years Ended December 31, 2008 and 2007




NOTE 1 –
BUSINESS ACTIVITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND SIGNIFICANT
ACCOUNTS




Principles of Consolidation
and Basis of Accounting




The
consolidated financial statements include the accounts of WHY USA Financial
Group, Inc. and its wholly-owned subsidiaries (the Company). All significant
intercompany accounts and transactions have been eliminated in
consolidation.




The
Company’s policy is to use the accrual method of accounting and to prepare and
present the consolidated financial statements in accordance with accounting
principles generally accepted in the United States. Prior year amounts have been
reclassified to conform to current year presentation.




Business Activity and
Organization




The
consolidated financial statements of the Company include the parent company, WHY
USA Financial Group, Inc., was incorporated as a Utah corporation in 1980 and
reorganized as a Nevada corporation in 1983, Northwest Financial Ltd.
(Northwest), acquired in 1999, incorporated as a Minnesota corporation, WHY USA
North America, Inc. (NA) acquired in 1999, incorporated as a Wisconsin
corporation, and TCS Mortgage, Inc. and its wholly-owned subsidiaries (TCS). TCS
includes the parent company, TCS Mortgage, Inc. (acquired in 2003 by WHY USA
Financial Group, Inc. and incorporated as a California corporation), TCS Realty,
Inc. (Realty) formed in 2004 as a California corporation, and Discover Mortgage
Corporation (Discover) acquired through a capital contribution from WHY USA
Financial Group, Inc. and incorporated as a Minnesota corporation.




The
Company through its subsidiary TCS is currently a mortgage broker only and prior
to the year ending December 31, 2006 TCS was a mortgage banker with its own line
of credit; the Company through Realty is a full service realtor operating in the
Southern California market; the Company through Discover provides mortgage
broker services in the state of Minnesota; and the Company through its
subsidiary NA provides franchised real estate operations to franchisees located
in 14 states, these services center around the WHY USA –“America’s Real Estate
Alternative” ® - $990 program.




Estimates




The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.




Cash Equivalents and
Concentration of Risk




The
Company maintains checking, money market and savings accounts at financial
institutions located in California and Minnesota. Accounts at each bank are
temporarily insured by the Federal Deposit Insurance Corporation (FDIC) up to
$250,000 (FDIC temporary increase through December 31, 2009). As of December 31,
2008 the Company did not have any uninsured cash balances. The Company has not
experienced any losses in such accounts and management believes it places its
cash on deposit with financial institutions which are financially
stable.




As of
December 31, 2008, the Company held $50,000 in restricted cash classified
as a non-current asset held to maturity. As of December 31, 2007, there was
no restricted cash. The restricted cash as of December 31, 2008 secures a letter
of credit held with a financial institution. The certificate of deposit matures
on May 5, 2012 and is held with an FDIC insured financial
institution.





37





Accounts and Notes
Receivable, Allowances and Fair Market Value




Accounts
receivable, net of allowance for doubtful accounts consist of the following at
December 31, 2008 and 2007, respectively:




December
      31, 2008
            
            
            December
      31, 2007Accounts
      receivable
            
            $
            75,600
            
            
            $
            79,629Other
      receivables
            
            
            4,841
            
            
            
            10,113Total
      accounts receivable
            
            
            80,441
            
            
            
            89,742Less
      allowance for doubtful accounts
            
            
            (61,670
            )
            
            
            (30,417
            )$
            18,771
            
            
            $
            59,325





In
accordance with Financial Accounting Standard No. 107, the Company's receivables
and notes represent credit risks associated with real estate transactions
originating with its franchisees. The Company extends credit as a result of its
franchise agreements with its franchisees. The franchisee's ability to repay is
generally predicated upon their ability to earn income from their real estate
transactions. Franchisees are generally paid a commission on real estate
transactions and must then remit a portion of that income to the Company. The
Company has an allowance for doubtful accounts of approximately $61,670 at
December 31, 2008. Bad debts totaled $87,898 and $19,958 for the years ended
December 31, 2008 and 2007, respectively. The Company has experienced no credit
losses in its mortgage lending operations.





Segment
Information




The
Company operates in two segments: Real Estate Franchise (REF) and Mortgage
Brokerage (MB). The Company has no intersegment revenues that are material to
the overall consolidated financial statements. The Company does not currently
segregate assets by segment as a majority of the Company’s total assets are
shared or considered non-segment assets which are segregated as “corporate.” The
Company has determined that it is not useful to assign its shared assets to
individual segments. Based on the aggregation criteria of Statement of Financial
Accounting Standards No. 131, “Disclosures about Segments of an Enterprise
and Related Information,” (SFAS 131) the Company’s service offerings in the MB
segment share similar economic characteristics, but are different from the
economic characteristics of the service offerings of our REF segment. As a
result of using the aggregation guidelines under SFAS 131, there is no logical
subgrouping of service offerings within either the MB or REF
segments.




Financial
Instruments





The
carrying amounts of financial instruments such as cash, accounts receivable,
prepaid  and other current assets, mortgage loans held for resale,
accounts payable, accrued expenses and other current liabilities, warehouse and
bank lines, mortgage notes payable, promissory notes and debentures payable and
capital leases approximate the related fair values due to the short-term
maturities of these instruments.





Brokered Loan
Fees





Loan fees
include brokered loan fees. Brokered loan fees represent fees received by TCS
and Discover for placing a loan with a lender, whereby no further obligation
exists.  The loan fee is recognized at the time the borrower and
lender sign final loan documents and the loan is funded.





Property and Equipment
Capitalization Policies





Property
and equipment is stated at cost and depreciated over the estimated useful lives
of the assets using the straight-line.  Amortization of leasehold
improvements is computed on the straight-line method over the shorter of the
lease term or the estimated useful lives of the assets. Maintenance and repairs
are charged to operations as incurred. When assets are sold, or otherwise
disposed of, the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in operating expense.





38





Impairment of
Goodwill





Goodwill
represents the excess purchase price of net tangible and intangible assets
acquired in business combinations over their estimated fair value. Goodwill is
allocated to the Company’s segments based on the nature of the product line of
the acquired entity. In accordance with Statement of Financial Accounting
Standards No. 141, “Business Combinations” (SFAS 141) and Statement of
Financial Accounting Standards No. 142, “Goodwill and Other Intangible
Assets” (SFAS 142), goodwill is tested for impairment on an annual basis and
earlier if there is an indicator of impairment. Furthermore, SFAS 142 requires
purchased intangible assets other than goodwill to be amortized over their
useful lives unless these lives are determined to be indefinite.




The
Company performs its goodwill impairment tests annually during the fourth
quarter of its fiscal year and earlier if an event or circumstance indicates
that impairment has occurred. During the years ended December 31, 2008 and 2007,
we determined that it was necessary to evaluate goodwill for impairment between
annual tests, in accordance with SFAS 142. The evaluation between annual
testing dates was due to the deteriorating conditions in certain housing markets
and the significant reduction in loans being funded during those years. The
process of evaluating goodwill for impairment involves the determination of the
fair value of our reporting units. Inherent in such fair value determinations
are certain judgments and estimates relating to future cash flows, including our
interpretation of current economic indicators and market valuations, and
assumptions about our strategic plans with regard to our operations. Due to the
uncertainties associated with such estimates, actual results could differ from
such estimates.  Goodwill associated with our reporting unit is
determined by that fair value of the building owned by the reporting unit. We
estimate the fair value of the building by obtaining an appraisal each year
which occurs during the winter months (which corresponded to our refinancing in
2007). This appraisal provides management with a realistic fair value during a
period which activities for like-kind property sales are at its lowest. In
addition the Company utilized a combination of valuation methods including a
discounted cash flow analysis and the guideline companies’ method to estimate
the fair value of the reporting unit. Based on this analysis, the Company
determined that impairment did exist, and as a result, an impairment charge was
recorded during the year which coincided with the 4th quarter
of 2007 and 2008, respectively.




Goodwill
is attributable to the acquisition of Discover. The Company in connection with
the acquisition of Discover recorded goodwill of $1,016,570. The Company
recorded impairment losses of $55,787 and $32,787 for the years ended December
31, 2008 and 2007, respectively, to reflect goodwill impairment on the
acquisition of Discover.





As of
December 31, 2008, goodwill associated with the Discover acquisition is recorded
at $729,028.





Accrued Expense and Other
Liabilities





Accrued
expenses and other liabilities consist of the following:


December
      31, 2008
            
            
            December
      31, 2007Accrued
      compensation and taxes
            
            $
            803,269
            
            
            $
            628,984Accrued
      interest
            
            
            172,621
            
            
            
            60,203$
            975,890
            
            
            $
            689,187





Deferred Revenue and
Liability Associated with Deferred Revenue





The
Company holds an annual conference for its franchisees in its REF segment.
Expenses and revenues related to the conference are deferred and realized at the
time the conference is held.





Advertising





Advertising
costs are charged to operations when incurred. Advertising expense for the years
ended December 31, 2008 and 2007 were approximately $3,200 and $11,100,
respectively.





39





Revenue
Recognition





Revenue
from loan originations are recognized at the time the mortgage loan closes or is
funded. The majority of revenue receivables are collected within five business
days. Real estate transaction fees are recognized at the closing of a real
estate transaction by a franchisee. The Company does not service a loan
portfolio and sells all of the loans it originates.





In
accordance with Financial Accounting Standard No. 45, the Company defers
recognition of new franchise sales until the commencement of operations by the
new franchisee. The new franchisee opens his/her real estate sales office in
his/her “protected” territory and receives training and marketing support, real
estate documents and other sales aids from the Company. These activities
generally occur within one month of the purchase of the franchise. All costs,
services and conditions related to new franchise sales have been incurred or
performed prior to the recognition of income from new franchise
sales.





Retirement Plans, Severance
or Bonus Plans





The
Company currently maintains a 401-K profit sharing plan through its subsidiary
TCS (Plan) for the benefit of its employees. The Plan allows each eligible
employee to voluntarily make pre-tax deferred salary contributions subject to
regulatory and plan limitations. The Company may make matching contributions in
amounts as determined by the Board of Directors. Prior to the year ended
December 31, 2006 the Company had an additional plan through its subsidiary
Discover (Discover Plan). The Discover Plan was merged during 2006 into the
Plan. The Discover Plan, a defined contribution plan, contained an annual
election whether to match or contribute up to $1,000 per employee per year based
upon a 25% matching ratio.  Eligible employees were able to contribute
up to 15% of their annual compensation. The Company made no contributions to the
Plan for the years ended December 31, 2008 and 2007.





Accounting for Share-Based
Compensation




The
Company accounts for share based compensation using Statement of Financial
Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS
123R) using the modified-prospective-transition method. Under this method,
share-based compensation cost is measured at the grant date based on the
estimated fair value of the award and is recognized as expense over the
employee’s requisite service period for all share-based awards granted, modified
or cancelled as of January 1, 2006.




Prior to
January 1, 2006, the Company accounted for its share-based awards under the
recognition and measurement principles of APB 25 and its related interpretations
and adopted the disclosure only provision of SFAS 123. Accordingly, no
compensation cost was recognized for the employee stock option plan or employee
stock purchase plan under the fair value recognition provisions of
SFAS 123.




Income
Taxes




Deferred
income taxes reflect the net tax effects of temporary differences between the
carrying amounts of assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes, using enacted tax rates in effect for
the year in which the differences are expected to reverse. Valuation allowances
are established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.




Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes (FIN48). FIN48 prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement of a tax position taken or expected to be taken in a return. The
adoption of this interpretation did not have a material impact on our financial
statements.





Earnings (loss) per
Share





Basic
earnings (loss) per share excludes dilution and is computed by dividing earnings
(loss) by the weighted average number of common shares outstanding during the
reported periods. Diluted earnings (loss) per share reflects the potential
dilution that could occur if stock options and other commitments to issue common
stock were exercised.





40




Diluted
earnings (loss) per share reflects the potential dilution that could occur from
the following items:




●
            
            Convertible
      debentures or preferred stock where the effect of those securities is
      dilutive;




●
            
            Dilutive
      stock options; and




●
            
            Dilutive
      common stock warrants.




For the
2008 and 2007 periods presented, the diluted net loss per share is equivalent to
the basic net loss per share because the Company experienced losses in each of
these years and thus no potential common shares underlying stock options,
warrants, convertible debt (debentures), or convertible preferred shares have
been included in the net loss per share calculations. Options and warrants to
purchase approximately 3,900,000 and 5,200,000 shares of common stock and
approximately 23,300,000 and 7,200,000 of convertible debentures, have been
omitted from the net loss per share for 2008 and 2007, respectively, as their
effect is antidilutive.




Recent Accounting
Pronouncements




In June
2008, the Financial Accounting Standards Board (FASB) ratified EITF 07-5,
“Determining Whether an Instrument (or Embedded Feature) is Indexed to an
Entity’s Own Stock,” which addresses the accounting for certain instruments as
derivatives under SFAS 133, “Accounting for Derivative Instruments and Hedging
Activities.” In September 2008, the FASB issued FASB Staff Position No. FAS
133-1 and FIN 45-4, effective for reporting periods (annual or interim) ending
after November 15, 2008. The Company does not currently have any outstanding
convertible debt with embedded features which are considered indexed to the
entity’s own stock and as a stand alone instrument would have been included in
stockholders’ equity (deficit), and therefore subject to a scope exception in
SFAS 133. Under this new pronouncement, specific guidance is provided regarding
requirements for an entity to consider embedded features as indexed to the
entity’s own stock. The guidance is effective for fiscal years beginning after
December 15, 2008. Based on the Company’s review of the pronouncement, the
Company does not believe the guidance will have an impact on its consolidated
financial statements.




In May
2008, the FASB issued FASB Staff Position No. APB 14-1, “Accounting for
Convertible Debt Instruments that May be Settled in Cash upon Conversion
(Including Partial Cash Settlement) (FSP APB 14-1)” that significantly impacts
the accounting for convertible debt. The FSP requires cash settled convertible
debt, to be separated into debt and equity components at issuance and a value to
be assigned to each. The value assigned to the debt component would be the
estimated fair value, as of the issuance date, of a similar bond without the
conversion feature. The difference between the bond cash proceeds and this
estimated fair value would be recorded as a debt discount and amortized to
interest expense over the expected life of the bond. Although FSP APB 14-1 has
no impact on the Company’s actual past or future cash flows, it may require the
Company to record non-cash interest expense as the debt discount is amortized
for any cash settled convertible debt entered into. The Company is currently
evaluating the impact on operations upon the adoption. In addition, if any cash
settled convertible debt is redeemed or converted prior to maturity, any
unamortized debt discount would result in a loss on extinguishment. FSP APB 14-1
will become effective for fiscal years beginning after December 15, 2008,
and early adoption is not permitted. The adoption will require retrospective
application.




In
May 2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally
Accepted Accounting Principles,” (SFAS 162). This standard reorganizes the GAAP
hierarchy in order to improve financial reporting by providing a consistent
framework for determining what accounting principles should be used when
preparing U.S. GAAP financial statements. SFAS 162 is scheduled to become
effective 60 days after the SEC’s approval of the Public Company Accounting
Oversight Board’s amendments to Interim Auditing Standard, AU Section 411, “The
Meaning of Present Fairly in Conformity with Generally Accepted Accounting
Principles.” The Company is currently evaluating the impact, if any; this new
standard will have on our financial position and results of
operations.





41




In March
2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments
and Hedging Activities, an amendment of FASB Statement No. 133" (SFAS 161). This
statement is intended to improve transparency in financial reporting by
requiring enhanced disclosures of an entity's derivative instruments and hedging
activities and their effects on the entity's financial position, financial
performance, and cash flows. SFAS 161 applies to all derivative instruments
within the scope of SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities" (SFAS 133) as well as related hedged items, bifurcated
derivatives, and non-derivative instruments that are designated and qualify as
hedging instruments. Entities with instruments subject to SFAS 161 must provide
more robust qualitative disclosures and expanded quantitative disclosures. SFAS
161 is effective prospectively for financial statements issued for fiscal years
and interim periods beginning after November 15, 2008, with early application
permitted. The Company is currently evaluating the disclosure implications of
this statement.




The
Company adopted the provisions of FASB Statement No. 157, “Fair Value
Measurements” (SFAS 157) effective January 1, 2008. In February 2008,
the FASB issued FASB Staff Position No. FAS 157-2, “Effective Date of FASB
Statement No. 157,” which provides a one year deferral of the effective
date of SFAS 157 for non-financial assets and non-financial liabilities, except
those that are recognized or disclosed in the financial statements at fair value
at least annually. In October 2008, the FASB issued FASB Staff Position No. FAS
157-3, effective upon issuance, including prior periods for which financial
statements have not been issued. Therefore, the Company deferred adoption of
SFAS 157 as it relates to its non financial assets and liabilities.
SFAS 157 defines fair value, establishes a framework for measuring fair
value under generally accepted accounting principles and enhances disclosures
about fair value measurements. Fair value is defined under SFAS 157 as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. Valuation techniques used to measure fair value under SFAS 157
must maximize the use of observable inputs and minimize the use of unobservable
inputs.




The
standard describes a fair value hierarchy based on three levels of inputs, of
which the first two are considered observable and the last unobservable, that
may be used to measure fair value. The Company’s assessment of the significance
of a particular input to the fair value measurements requires judgment, and may
affect the valuation of the assets and liabilities being measured and their
placement within the fair value hierarchy. The three levels of input
are:




Level 1 -
Quoted prices in active markets for identical assets or
liabilities.




Level 2 -
Inputs other than Level 1 that are observable, either directly or indirectly,
such as quoted prices for similar assets or liabilities; quoted prices in
markets that are not active; or other inputs that are observable or can be
corroborated by observable market data for substantially the full term of the
assets or liabilities.




Level 3 -
Unobservable inputs that are supported by little or no market activity and that
are significant to the fair value of the assets or liabilities.




The
adoption of this statement did not have a material impact on the Company’s
consolidated results of operations and financial condition.




NOTE 2 –
BUSINESS COMBINATIONS




In June
2001, the FASB adopted SFAS No. 141 (SFAS 141) “Business Combinations,” SFAS No.
142 (SFAS 142) “Goodwill and Other Intangible Assets” and in August 2001, SFAS
No. 144 (SFAS 144) “Accounting for the Impairment or Disposal of Long-Lived
Assets.” The Company's accounting procedures have been amended to adapt these
statements at the earliest date the statements became effective. The Company's
franchise costs do not meet the criteria of being classified as goodwill as they
represent contractual or other legal rights over the control of future economic
benefits, as such they will continue to be amortized over twelve years. The
Company historically expends marketing and advertising expenses to enlarge its
franchise base through the installation of new franchises; however over the past
few years more franchises have closed than opened. The Company's franchise
transaction revenues have declined to $132,940 for the year ended December 31,
2008 from $182,461 for the year ended December 31, 2007. The historical cost
value of the Company's franchises declined as the Company amortized the
franchise costs. The Company believes that its WHY USA franchise should sell at
some multiple of its transaction fees; however continuing losses have a
significant impact on a buyer's perception of franchise system’s value. Given
the impact of the previously discussed factors the Company recorded impairment
losses of $1,351,050 during prior years for the NA
acquisition.  Impairment loss is equal to the amount by which the
carrying value of the assets exceeded their estimated fair market
value.





42





The
Company during the year ended December 31, 2002 issued 1,177,140 shares of
common stock for all of the outstanding equity of Discover. During the year
ended December 31, 2002 the Company issued an additional 12,000,000 shares of
common stock to the former shareholders of Discover based on the completion of
several performance benchmarks and recorded goodwill of $1,016,570. The Company
for the years ended December 31, 2008 and 2007, recorded an impairment loss
through its subsidiary, TCS, of $55,787 and $32,787, respectively. Impairment
loss is equal to the amount by which the carrying value of these assets exceeded
their estimated fair market value as of the valuation date.





Goodwill
is the excess of the purchase price paid for acquired entity over the fair value
of the assets and liabilities acquired. The Company recognized $1,318,456 in
goodwill with respect to its acquisition of TCS. The allocation of the purchase
price of TCS Mortgage, Inc., was as follows:





Cash
              
              $
              595,291Accounts
      receivable
              
              
              65,355Mortgages
      held for resale
              
              
              1,817,929Equipment,
      net
              
              
              31,949Deposits
      and prepaid assets
              
              
              61,898Goodwill
              
              
              1,318,456Minus
      assumed liabilities
              
              
              (2,280,878
              )Total
      purchase price
              
              $
              1,610,000




Due to a
significant decline in TCS’s mortgage and real estate business post acquisition,
the Company during prior years recorded an impairment loss of $1,318,456.
Impairment loss is equal to the amount by which the carrying value of these
assets exceeded their estimated fair market value as of the valuation
date.





NOTE 3 –
BUSINESS SEGMENTS





The
Company has two reportable segments: real estate franchise (REF) and mortgage
origination/brokering (MB). The Company operations are conducted regionally
within the United States; Upper Midwestern states as well as the Southwest
(which includes Southern California and Nevada).





The
Company does not have intersegment revenues that are material to the
consolidated financial statements. In addition, the Company does not segregate
all assets by segment as a majority of the Company’s total assets are shared or
considered non-segment assets. As a result, the Company has determined it is not
useful, nor appropriate, to assign its shared assets to individual
segments.





The
Company’s accounting policies for both of its segments are the same as those
described in the summary of significant accounting policies and significant
accounts. Management evaluates segment performance based on segment profit or
loss before income taxes and non-recurring gains and losses. Transfers between
segments, if occurring, are valued at market.




The table
below reports segment financial information. Our segment entitled “Other”
includes assets and operations not specifically associated with the other
defined segments, including corporate assets and investments. We measure the
performance of our segments based on total net revenues less costs of revenues
and general and administrative expenses, a measure we define as net operating
income (loss) (NOI). We believe that NOI is an important supplemental measure of
operating performance for our segments because it provides a measure of the core
operations that is unaffected by depreciation, amortization, financing and other
non-core expenses; this measure is particularly useful in our opinion in
evaluating the performance of segments, as well as individual
subsidiaries.





43





Real
      Estate
              
              
              MortgageFranchise
              
              
              Brokerage
              
              
              Other
              
              
              TotalFor
      year ending December 31, 2008Revenues
              
              $
              132,940
              
              
              $
              1,116,473
              
              
              $
              -
              
              
              $
              1,249,413Cost
      of revenues
              
              
              33,448
              
              
              
              692,481
              
              
              
              -
              
              
              
              725,929Selling,
      general and administrative expenses
              
              
              159,446
              
              
              
              880,735
              
              
              
              565,386
              
              
              
              1,605,567Net
      operating loss
              
              $
              (59,954
              )
              
              $
              (456,743
              )
              
              $
              (565,386
              )
              
              $
              (1,082,083
              )Additions(dispositions)
      to segmented assets
              
              $
              (45,077
              )
              
              $
              (36,646
              )
              
              $
              (88,824
              )
              
              $
              (170,547
              )Segment
      assets at December 31, 2008
              
              $
              23,568
              
              
              $
              1,329,090
              
              
              $
              108
              
              
              $
              1,352,766For
      year ending December 31, 2007Revenues
              
              $
              182,461
              
              
              $
              2,179,811
              
              
              $
              1,657
              
              
              $
              2,363,929Cost
      of revenues
              
              
              37,675
              
              
              
              1,342,125
              
              
              
              -
              
              
              
              1,379,800Selling,
      general and administrative expenses
              
              
              98,582
              
              
              
              1,124,083
              
              
              
              475,624
              
              
              
              1,698,289Net
      operating loss
              
              $
              46,204
              
              
              $
              (286,397
              )
              
              $
              (473,967
              )
              
              $
              (714,160
              )Additions(dispositions)
      to segmented assets
              
              $
              12,920
              
              
              $
              (91,052
              )
              
              $
              77,166
              
              
              $
              (966
              )Segment
      assets at December 31, 2007
              
              $
              68,645
              
              
              $
              1,365,736
              
              
              $
              88,932
              
              
              $
              1,523,313





The
following table reconciles our NOI for reportable segments to loss from
operations as reported on our Consolidated Statement of Operations:





December
      31, 2008
            
            
            December
      31, 2007NET
      OPERATING LOSS FROM SEGMENTS
            
            $
            (1,082,083
            )
            
            $
            (714,160
            )DEPRECIATION
      AND AMORTIZATION EXPENSE
            
            
            35,042
            
            
            
            48,227IMPAIRMENT
      OF GOODWILL
            
            
            55,787
            
            
            
            32,787OPERATING
      LOSS
            
            
            (1,172,912
            )
            
            
            (795,174
            )OTHER
      INCOME (EXPENSE):Interest
      expense
            
            
            (212,321
            )
            
            
            (205,121
            )Interest
      income
            
            
            803
            
            
            
            127Gain
      on extinguishment of debt
            
            
            -
            
            
            
            49,867Other
      income
            
            
            170
            
            
            
            131,580Total
      other income (expense)
            
            
            (211,348
            )
            
            
            (23,547
            )LOSS
      FROM CONTINUING OPERATIONS
            
            $
            (1,384,260
            )
            
            $
            (818,721
            )





NOTE 4 -
BANK LINE OF CREDIT





The
Company through its Discover operations has a line of credit with a financial
institution to meet short-term working capital requirements. Under this credit
facility the Company has $100,000 of unsecured revolving line credit which bears
interest payable monthly at prime plus 3.75% per annum. There are no parent
guarantees or covenants associated with this facility.





As of
December 31, 2008 and 2007 the line of credit balance with stated year-end
interest rate was $97,570 and 8.50%, and $99,789 and 11.50%,
respectively.





44





NOTE 5 –
MORTGAGE NOTES PAYABLE





Mortgage
notes payable consist of the following at December 31, 2008 and 2007,
respectively:


December
      31, 2008
            
            
            December
      31, 2007Mortgage
      Payable - financial institution (secured by property), monthly
      installments of principal and interest of $8,294 including interest at
      7.75% per annum with all unpaid principal due November 2010,
      collateralized by a building
            
            $
            845,784
            
            
            $
            872,734Note
      Payable - individual (secured by property), interest due monthly. Interest
      payable at 7.5%, note due and payable January 2005.
            
            
            -
            
            
            
            55,000Total
      mortgage notes payable
            
            
            845,784
            
            
            
            927,734Less
      current maturities
            
            
            36,112
            
            
            
            88,427Long
      term portion of mortgage notes payable
            
            $
            809,672
            
            
            $
            839,307





Maturities
of mortgage notes payable listed above at December 31, 2008, are as
follows:





For
      the years ending December 31,2009
              
              $
              36,1122010
              
              
              809,672$
              845,784


Settlement and Mediated
Judgment $150,000 Mortgage Note Payable





During
the year ended December 31, 2007 the Company entered into a settlement and
mediated judgment with the holder of the $150,000 mortgage note payable. The
settlement required payments of $175,000 in cash and the issuance of 1,000,000
shares of the Company’s common stock to the holder. At December 31, 2007 the
Company owed $55,000 on the mediated judgment. Pursuant to the settlement
agreement the Company was obligated to make the final payment to the holder on
or before March 11, 2008 in which it did. The Company has the right to redeem or
first right of refusal to repurchase the shares from the holder at any time for
3 years in whole or in part at a price of $0.05 per share.





Refinance of Discover
Building and Land





During
the year ended December 31, 2007 the Company refinanced its property located in
Minneapolis, Minnesota. The prior mortgage note payable was set to mature in
February 2008. The Company through another financial institution entered into a
new mortgage note payable to refinance its mortgage on the property. The new
mortgage note payable matures in November 2010 and is collateralized by the
building and land. The new mortgage note payable is personally guaranteed as
well by a director of the Company in the event of default.





45





NOTE 6 –
NOTES PAYABLE AND CONVERTIBLE DEBENTURES





Notes
payable and convertible debentures consist of the following at December 31, 2008
and 2007, respectively:





December
      31, 2008
            
            
            December
      31, 2007Convertible
      Debentures - TCS acquisition, 21 members, principal and interest due and
      payable November 2006, monthly payments of interest in arrears at 7.5% per
      annum. Certain payment restrictions apply and the debentures are
      convertible into common stock of the Company at a price of $0.20 per
      share
            
            $
            300,000
            
            
            $
            300,000Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 5.03% per annum and the note is
    unsecured.
            
            
            72,767
            
            
            
            73,319Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 16% per annum and the note is unsecured.
            
            
            7,000
            
            
            
            -Note
      Payable - individual, principal and interest due and payable December
      2008, interest at 8% per annum and the note is unsecured.
            
            
            5,000
            
            
            
            -Convertible
      Debentures - 2005 investment by five investors, principal and interest due
      and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
stock
            
            
            100,000
            
            
            
            100,000Convertible
      Debentures - 2006 investment by four investors, principal and interest due
      and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
    stock.
            
            
            60,000
            
            
            
            60,000Convertible
      Debentures - 2007/2008 investment by one investor, principal and interest
      due and payable 36 months from the date of investment, monthly payments of
      interest in arrears at 7.0% per annum. The debentures are convertible into
      common stock of the Company based on a discount to market of 7% of the
      30-day trailing average price of the Company's common
stock
            
            
            950,200
            
            
            
            50,000Total
      notes payable and convertible debentures
            
            
            1,494,967
            
            
            
            583,319Less
      current maturities
            
            
            544,767
            
            
            
            473,319Long
      term portion of notes payable and convertible debentures
            
            $
            950,200
            
            
            $
            110,000





Maturities
of notes payable and convertible debentures listed above at December 31, 2008,
are as follows:





For
      the years ending December 31,2009
              
              $
              544,7672010
              
              
              50,0002010
              
              
              900,200$
              1,494,967




Convertible Debentures
2003





As of
December 31, 2008 the Company was in default with respect to its $300,000 in
convertible debentures (the 2003 Debentures). The 2003 Debentures were due and
payable November 30, 2006.  The 2003 Debentures bear interest at a
rate of 7.5% per annum payable in arrears by one month. Interest payments may be
deferred until maturity, based on a formula provided that the Company is showing
a net loss or negative earnings before interest, taxes, depreciation and
amortization (EBITDA). The Company has the right to pay principal and accrued
interest through common stock of the Company provided that the average closing
price of the Company's common stock exceeds $0.20 for ten consecutive trading
days prior to the date of payment. The 10 holders of the 2003 Debentures have
the option to convert into shares of common stock at anytime subject to 30 days
prior notice to the Company. The 2003 Debentures are convertible at $0.20 per
common share at any time by the holder.





Note Payable -
$400,000





As of
December 31, 2006 the Company was in default with respect to its note payable in
the amount of $400,000. The Company entered into an agreement to fund working
capital requirements from an entity (ies) owned by both a current director and a
former director of the Company which required the repayment of the note balance
prior to January 1, 2006. The note payable bore interest at 12.0% per annum with
a default interest rate of 18.0% which began January 1, 2006. During the year
ended December 31, 2007 the Company entered into an agreement with the holders
of the note payable to exchange the debt and accrued interest at the non-default
rate into equity of the Company. The Company issued 3,307,063 shares of common
stock in exchange for $121,733 in accrued interest, and 40,000 shares of
conditionally (or non-mandatorily) redeemable convertible cumulative preferred
stock in exchange for the note payable of $400,000. The Company recognized gain
on extinguishment of debt in the amount of $49,867 for the year ended December
31, 2007.





46





Convertible Debentures 2005,
2006, 2007, 2008





As of
December 31, 2008 the Company had outstanding $1,110,200 in convertible
debentures (the Post-2003 Debentures). The Post-2003 Debentures are due and
payable three years from the date of the original issuance.  The
Post-2003 Debentures bear interest at a rate of 7.0% per annum payable monthly.
The 9 holders of the Post-2003 Debentures have the option to convert into shares
of common stock upon written notice to the Company. The debentures are
convertible into common stock at a price equal to 93% of the average 30 day
closing price of the Company’s publicly traded common stock prior to notice of
conversion.





NOTE 7 –
COMMITMENTS AND CONTINGENCIES





Operating
Leases





The
Company leases office space for its subsidiaries in two markets, San Diego and
Las Vegas. The Company for its Minnesota operations occupies space in its
building located in Minneapolis. The Company’s TCS subsidiary leases its primary
office space and Las Vegas office space under operating leases that expires in
2010. The Company’s NA subsidiary leased office space under a month-to-month
lease with triple-net requirements.





The
Company leases equipment under both capital and operating leases. Future minimum
operating and capital lease commitments are as follows:





Capital
      Lease Obligations
              
              
              
              Operating
      Lease Obligations2009
              
              $
              2,450
              
              2009
              
              $
              61,9392010
              
              
              756
              
              2010
              
              
              37,0722011
              
              
              -
              
              2011
              
              
              -2012
              
              
              -
              
              2012
              
              
              -Thereafter
              
              
              -
              
              Thereafter
              
              
              -Total
      capital leases
              
              
              3,206
              
              Total
      minimum lease payments
              
              $
              99,011Less
      interest portion
              
              
              (78
              )$
              3,128





Rent
expense for the years ended December 31, 2008 and 2007 was approximately
$119,600 and $171,000, respectively.





Lease
Income





The
Company leases a portion of its Minneapolis office space to various tenants,
which require them to pay a monthly base rent. Most tenants are on a
month-to-month agreement with the Company. Of the tenants currently occupying
the building, the Company has one long term lease tenant. Monthly rental
payments are $1,470 and the lease term is three years. The lease expires in June
2010.





Future
income from rental leases are as follows for the years ending December
31:





Future
      Lease Income2009
            
            $
            17,6402010
            
            
            8,8202011
            
            
            -2012
            
            
            -Thereafter
            
            
            -Total
      lease income
            
            $
            26,460




47





Executive Employment
Agreements





The
Company has an executive employment agreement with its chief executive officer
which provides for cash compensation of $100,000 per annum as well as equity
compensation of $75,000 per annum. As of December 31, 2008 the Company has
included in accrued expense approximately $710,000 in compensation due to its
executive officer. As part of the Company’s agreement with the executive officer
the Company will issue shares of common stock based on a pre-determined formula
for the past due compensation and enter into a new employment agreement with the
executive officer. As part of the Company’s efforts to conserve cash and control
expenditures during its cost-cutting plan the executive officer had deferred
payment of his compensation during the past five years. The Company’s
compensation committee will determine the formula and exact amount of
compensation due as well as any performance bonuses that the executive officer
may have earned.





Litigation





The
Company is subject to other potential liabilities under government regulations
and various claims and legal actions that may be asserted. Matters may arise in
the ordinary course and conduct of the Company’s business, as well as through
its acquisitions. Claim estimates that are probable and can be reasonably
estimated are reflected as liabilities of the Company. The ultimate resolution
of these matters is subject to many uncertainties. It is reasonably possible
that matters, which may be asserted, could ultimately be decided unfavorably for
the Company. Although the amount of liability at December 31, 2008,
currently cannot be ascertained, the Company believes that any resulting
liability should not materially affect the Company’s consolidated financial
statements.





NOTE 8 -
PROPERTY AND EQUIPMENT





The
Company's property and equipment by significant category consist of the
following at December 31, 2008 and 2007, respectively:





December
      31, 2008
            
            
            December
      31, 2007Furniture
      and equipment
            
            $
            162,424
            
            
            $
            168,911Building
      and improvements
            
            
            468,716
            
            
            
            468,716Land
            
            
            100,000
            
            
            
            100,000Total
      property and equipment
            
            
            731,140
            
            
            
            737,627Less
      accumulated depreciation
            
            
            (251,917
            )
            
            
            (240,143
            )$
            479,223
            
            
            $
            497,484





NOTE 9 –
EMPLOYEE STOCK PLANS, STOCK BASED COMPENSATION AND OTHER COMMON STOCK
EQUIVALENTS





Stock Based
Compensation





In
December 2004, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards No. 123 (revised 2004), “Share-Based
Payment” (SFAS 123R), which revised Statement of Financial Accounting Standards
No. 123, “Accounting for Stock-Based Compensation” (SFAS 123), supersedes
APB Opinion No. 25, “Accounting for Stock Issued to Employees” (APB 25) and
amends Statement of Financial Accounting Standards No. 95, “Statement of
Cash Flows” (SFAS 95). SFAS 123R establishes the accounting for share-based
awards exchanged for employee services and requires companies to expense the
estimated fair value of these awards over the requisite employee service period.
The provisions of SFAS 123R are effective for the Company beginning
January 1, 2006. Prior to January 1, 2006, the Company accounted for
its share-based awards under the recognition and measurement principles of APB
25 and its related interpretations and adopted the disclosure only provision of
SFAS 123. Accordingly, no compensation cost was recognized for the employee
stock option plan or employee stock purchase plan under the fair value
recognition provisions of SFAS 123. Effective January 1, 2006, the Company
adopted the provisions of SFAS 123R using the modified-prospective-transition
method. Under this method, share-based compensation cost is measured at the
grant date based on the estimated fair value of the award and is recognized as
expense over the employee’s requisite service period for all share-based awards
granted, modified or cancelled as of January 1, 2006.





48





The
Company used the Black-Scholes option-pricing model (Black-Scholes model) to
value share-based employee stock option and purchase right awards, which was
also used for the Company’s pro forma disclosures required under SFAS 123 prior
to adoption of SFAS 123R on January 1, 2006. The determination of fair
value of stock-based payment awards using an option-pricing model requires the
use of certain estimates and assumptions that affect the reported amount of
share-based compensation cost recognized in the Consolidated Statement of
Operations. Among these include the expected term of options, estimated
forfeitures, and expected volatility of the Company’s stock price, expected
dividends and the risk-free interest rate.




The
expected term of share-based awards represents the weighted-average period the
awards are expected to remain outstanding and is an input in the Black-Scholes
model. In determining the expected term of options, the Company considered
various factors including the vesting period of options granted, employees’
historical exercise and post-vesting employment termination behavior, expected
volatility of the Company’s stock and aggregation by homogeneous employee
groups. The Company used a combination of the historical volatility of its stock
price and the implied volatility of restricted stock issued under the
convertible debentures with terms of up to approximately two years to estimate
the expected volatility assumption input to the Black-Scholes model in
accordance with SFAS 123R and the SEC’s Staff Accounting Bulletin No. 107
(SAB 107). In prior years, the Company relied solely on the historical
volatility of its stock price for its volatility assumption input to the
Black-Scholes model. The Company’s decision to use a combination of historical
and implied volatility was based upon its assessment that such a combination was
more representative of future expected stock price trends. The expected dividend
yield assumption is based on the Company’s expectation of future dividend
payouts. The Company has never declared or paid any cash dividends on its common
stock and currently does not anticipate paying such cash dividends. However,
this assumption may be subject to substantial change in the future. Any
determination to pay dividends in the future will be at the discretion of the
Company’s Board of Directors and will depend upon the Company’s results of
operations, financial condition, financial covenants, tax laws and other factors
as the Board of Directors, in its discretion, deems relevant.





Options





In 2000
the Company's Board of Directors approved a stock option plan (the Option Plan)
for its officers, directors, employees and key consultants. Options granted
under the plan may or may not qualify as incentive stock options under the
Internal Revenue Service Code. The term of the plan is for ten years, and allows
the administrator to designate whether the options granted are qualified or
non-qualified. Generally, option price will determine the designation as to
whether the options are qualified or non-qualified. The Company utilizes the
intrinsic method of measuring compensation for options granted. The Option Plan
provides that if the recipient ceases to be employed or provide services to the
Company, the options held by the recipient must be exercised within 30 to 90
days depending on the administrator’s designation. No compensation expense has
been reflected in the financial statements for the granting of options made
under the Option Plan as the exercise price was above market for all grants. The
Company for the years ended December 31, 2008 and 2007 did not grant any
additional options. The Company recognized no forfeitures during the years ended
December 31, 2008 or 2007.





The
following table sets forth options outstanding as of December 31, 2008, their
original date of grant, exercise price, vested amounts, and expiry:





Original
            
            
            Options
            
            
            
            
            
            
            
            
            Options
            
            
            
            
            
            
            
            OptionDate
            
            Grant
            
            
            Outstanding
      at
            
            
            2008
            
            
            2008
            
            
            Outstanding
      at
            
            
            Options
            
            
            Option
            
            ExpirationGranted
            
            Amount
            
            
            12/31/2007
            
            
            Granted
            
            
            Forfeited
            
            
            12/31/2008
            
            
            Vested
            
            
            Price
            
            DateJuly-00
            
            
            750,000
            
            
            
            750,000
            
            
            
            -
            
            
            
            -
            
            
            
            750,000
            
            
            
            750,000
            
            
            $
            0.50
            
            July-10February-01
            
            
            750,000
            
            
            
            750,000
            
            
            
            -
            
            
            
            -
            
            
            
            750,000
            
            
            
            750,000
            
            
            $
            0.50
            
            February-11June-03
            
            
            2,250,000
            
            
            
            2,250,000
            
            
            
            -
            
            
            
            -
            
            
            
            2,250,000
            
            
            
            2,250,000
            
            
            $
            0.20
            
            June-13February-04
            
            
            150,000
            
            
            
            150,000
            
            
            
            
            
            
            
            
            
            
            
            150,000
            
            
            
            150,000
            
            
            $
            0.05
            
            February-14Totals
            
            
            
            
            
            
            3,900,000
            
            
            
            -
            
            
            
            -
            
            
            
            3,900,000
            
            
            
            3,900,000




49





The
following table reflects the grant, exercise of, forfeiture and weighted average
price of options for each of the years ended December 31, 2008 and 2007,
respectively:





Options
            
            
            
            
            
            
            
            
            Options
            
            
            
            
            
            WeightedFor
      Year Ending
            
            Outstanding
      at
            
            
            
            
            
            
            Outstanding
      at
            
            
            Options
            
            
            AverageBOY
            
            
            Granted
            
            
            Forfeited
            
            
            EOY
            
            
            Vested
            
            
            PriceDecember
      31, 2007
            
            
            3,900,000
            
            
            
            -
            
            
            
            -
            
            
            
            3,900,000
            
            
            
            3,900,000
            
            
            $
            0.310December
      31, 2008
            
            
            3,900,000
            
            
            
            -
            
            
            
            -
            
            
            
            3,900,000
            
            
            
            3,900,000
            
            
            $
            0.310-
            
            
            
            -





Warrants





The
Company as of December 31, 2008 had no warrants outstanding. The warrants are
exercisable at $0.20 per share and terminated on December 19, 2008. The warrants
were issued in connection with the TCS acquisition in 2003 along with the 2003
Convertible Debentures. These warrants had a term of five years from the date of
issue.





The
following table reflects the issuance, exercise of, and forfeiture of warrants
for the years ended December 31, 2008 and 2007, respectively:





Warrants
            
            
            
            
            
            
            
            
            
            
            
            WarrantsFor
      the year ending
            
            Outstanding at
            
            
            
            
            
            
            
            
            
            
            
            Outstanding atBOY
            
            
            Issued
            
            
            Exercised
            
            
            Forfeited
            
            
            EOY31-Dec-07
            
            
            1,309,321
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            1,309,32131-Dec-08
            
            
            1,309,321
            
            
            
            -
            
            
            
            -
            
            
            
            (1,309,321
            )
            
            
            --
            
            
            
            -
            
            
            
            -





Preferred
Stock





The
Company during the year ended December 31, 2007 tendered $400,000 in notes
payable along with accrued interest due and payable as of December 31, 2007. The
Company issued 3,307,063 shares of common stock in exchange for $121,733 in
accrued interest, and 40,000 shares of non-mandatorily redeemable convertible
cumulative preferred stock in exchange for the note payable of $400,000. The
Company recognized gain on extinguishment of debt in the amount of $49,867 for
the year ended December 31, 2007.





The
Series A preferred stock carries the following attributes: for each share of
preferred stock one vote is attributable in the matters requiring shareholder
vote; cumulative dividends of 7.0% per annum; non-mandatorily redeemable at
anytime between July 1, 2009 and December 31, 2010 (or if the 20-day average
closing price of the Company’s common stock exceeds $0.15 per share) by the
Company at 150% of the issuance price of the shares or $11.50; convertible by
the holders at any time between January 1, 2009 and December 31, 2010 at 90% of
the 20-day average closing price of the Company’s common stock; or “forced
conversion” by the Company at any time after December 31, 2008 with 60-days
notice to the holder once the 20-day average closing price of the Company’s
common stock exceeds $0.175 per share based on the 90% conversion
price.





NOTE 10 -
RELATED PARTY TRANSACTIONS





During
the year ended December 31, 2007, the Company entered into 6 convertible
debentures with a current director of the Company. The total amount of related
party convertible debentures entered into during 2007 was $262,500. The
convertible debentures are due and payable 36 months from the date entered into,
require monthly payments of interest of 7.0% per annum in arrears. The
convertible debentures are convertible into common stock of the Company based on
a discount to market of 7% of the 30-day trailing average closing price of the
Company’s common stock. The Company received notice during the year ended
December 31, 2007 that $492,500 in related party convertible debentures and
accrued interest of $22,218 was tendered for conversion in exchange for
9,772,725 shares of common stock.





50





During
the year ended December 31, 2007, the Company entered into a short-term
arrangement with a current director of the Company for working capital funds. As
of December 31, 2007 this short-term arrangement amounted to $50,000. In
addition to the short-term arrangement the Company along with the refinance of
its Minneapolis, Minnesota property was required to obtain from the related
party a personal guarantee of the mortgage note payable with the financial
institution. In the case of default by the Company and the inability to cure the
related party would take possession of the property as well make payment to the
financial institution of the full amount due. The Company has filed a deed of
trust on its property for the related party’s personal guarantee with the
financial institution.





During
the year ended December 31, 2007, the Company entered into an agreement with two
business entities who collectively own the $400,000 note payable that was in
default by the Company. One of the business entities is owned and controlled by
a former director of the Company; the other business entity is owned and
controlled by two former directors of the Company. The entities agreed to tender
all outstanding principal and accrued interest in exchange for a combination of
common stock and preferred stock. The note payable in the amount of $400,000 was
exchanged for 40,000 shares of preferred stock of the Company with a purchase
price of $10 per share. Accrued interest due and payable of $121,733 was
tendered in exchange for 3,307,063 shares of common stock. As part of the
exchange the Company recognized a gain on extinguishment of debt of $49,867,
whereby the entities waived the default interest.





During
the year ended December 31, 2008, the Company entered into several short-term
arrangements with a current director of the Company for working capital funds.
As of December 31, 2008 these short-term arrangements amounted to $950,200
(which includes $50,000 as of December 31, 2007). Prior to year end, the Company
entered into 32 convertible debentures with a current director of the Company
memorializing these short-term arrangements in agreement. Total related party
convertible debentures entered into during 2008 were $950,200. The convertible
debentures are due and payable 36 months from the date entered into, requiring
monthly payments of interest of 7.0% per annum in arrears. The convertible
debentures are convertible into common stock of the Company based on a discount
to market of 7% of the 30-day trailing average closing price of the Company’s
common stock. In addition the Company recorded approximately $36,000 in accrued
interest due on these convertible debentures that was included in the accounts
payable balance at year-end.





During
the year ended December 31, 2008, the Company entered into two notes payable
with an officer of the Company and an employee. These note payables bear
interest at 16% and 8%, respectively. As of December 31, 2008 the Company
recorded reimbursable business expenses due to this officer in the amount of
$10,022 that was included in the accounts payable balance at
year-end.





NOTE 11 -
INCOME TAXES




In June
2006, the FASB issued Interpretation No. 48 (FIN 48), “Accounting for
Uncertainty in Income Taxes,” an interpretation of SFAS 109, “Accounting for
Income Taxes.” FIN 48 clarifies the accounting for uncertain tax positions.
FIN 48 prescribes a comprehensive model for how companies should recognize,
measure, present and disclose in their financial statements uncertain tax
positions taken or expected to be taken on a tax return. Under FIN 48, tax
benefits shall initially be recognized in the financial statements when it is
more likely than not the position will be sustained upon examination by the tax
authorities. Such tax positions shall initially and subsequently be measured as
the largest amount of tax benefit that is greater than 50% likely of being
realized upon ultimate settlement with the tax authority, assuming full
knowledge of the position and all relevant facts. FIN 48 also revises disclosure
requirements to include an annual tabular rollforward of unrecognized tax
benefits. The provisions of this interpretation are required to be adopted for
fiscal periods beginning after December 15, 2006. The Company adopted this
provision beginning January 1, 2007. Net impact due to the adoption of FIN
48 was no decrease to the accumulated deficit.





51




Prior to
their acquisitions, Discover Mortgage was taxed as a Sub S Corporation, and TCS
Mortgage, Inc. was party to a tax sharing agreement with its former parent. The
Company pays minimum franchise taxes of $800 per year for each California
corporate entity that does business as part of the consolidated
entity.




During
2008 the State of California enacted legislation which limits the use of
operating loss and tax credit carryforwards to offset income for years 2008 and
2009.




At
December 31, 2008, the Company had $8.3 million and $4.8 million of federal
and state net operating losses (NOL) carry forwards, respectively. It is more
likely than not that the Company will not fully realize certain federal or
states’ NOL’s. The federal and state NOL carry forwards begin to expire in 2019
and 2014, respectively.




The
realization of any future income tax benefits from the utilization of net
operating losses may be severely limited. Federal and state tax laws contain
complicated change of control provisions (generally when a more than 50 percent
ownership change occurs within a three-year period), which, if triggered, could
limit or eliminate the use of the Company's net operating loss
carry-forwards.  The Company has not performed a study to determine if
this type of change of ownership has occurred.




The
provision for income taxes consisted of the following:





December
      31, 2008
            
            
            December
      31, 2007Current
      expense:Federal
      taxes
            
            $
            -
            
            
            $
            -State
      taxes
            
            
            1,600
            
            
            
            1,600$
            1,600
            
            
            $
            1,600Deferred
      expense (benefit)Federal
            
            $
            -
            
            
            $
            -State
            
            
            -
            
            
            
            --
            
            
            
            --
            
            
            
            -$
            1,600
            
            
            $
            1,600





A
reconciliation of the effective tax rates and the statutory U.S. federal income
tax rates is as follows:





(percentages
      as shown)
            
            December
      31, 2008
            
            
            December
      31, 2007U.S.
      federal statutory rate
            
            
            (34.00
            )
            
            
            (34.00
            )State
      income tax, net of federal tax benefit
            
            
            (6.00
            )
            
            
            (6.00
            )Permanent
      differences
            
            
            1.00
            
            
            
            1.00(Increase)
      decrease in deferred tax asset valuation allowance
            
            
            39.00
            
            
            
            39.00Effective
      tax rate
            
            
            0.00
            
            
            
            0.00




52




Temporary
differences that give rise to a significant portion of the deferred tax asset
are as follows:




December
      31, 2008
            
            
            December
      31, 2007Deferred
      tax assets:Net
      operating loss carryforwards
            
            $
            3,067,000
            
            
            $
            3,001,000Provision
      for income taxes
            
            
            1,600
            
            
            
            1,600Accrued
      payroll costs and vacation
            
            
            337,000
            
            
            
            95,000Total
      gross deferred tax asset
            
            
            3,405,.600
            
            
            
            3,097,600Valuation
      allowance
            
            
            (3,405,600
            )
            
            
            (3,097,600
            )$
            -
            
            
            $
            -




A
valuation allowance equal to the net deferred tax asset has been recorded as
management of the Company has not been able to determine that it is more likely
than not that the deferred tax assets will be realized.




During
the years ended December 31, 2008 and 2007, the valuation allowance increased
by approximately $308,000 and $333,000, respectively.




NOTE 12 –
STOCK ISSUANCES/CANCELLATION




During
the year ended December 31, 2007 we issued a total of 9,772,725 shares of common
stock to a director and holder of convertible debentures in the amount of
$492,500 of the Company as conversion of the debentures and accrued interest of
$22,218. The Company valued the shares at a price of $0.051 per share which was
determined to be fair market value.




During
the year ended December 31, 2007 we issued a total of 2,592,938 shares of common
stock as payment for services under a financial advisory contract to an
individual and a corporate entity that this individual controls and owns. The
Company valued the shares at a price of $0.058 per share which was determined to
be fair market value.




During
the year ended December 31, 2007 we issued a total of 1,000,000 shares of common
stock as payment pursuant to a settlement with the holder of a mortgage note
payable. The Company valued the shares at a price of $0.05 per share which was
determined to be fair market value.




During
the year ended December 31, 2007 we issued a total of 3,307,063 shares of common
stock as payment of accrued interest of $121,733. The Company valued the shares
at a price of $0.037 per share which was determined to be fair market
value.




During
the year ended December 31, 2007 we issued a total of 40,000 shares of preferred
stock as payment the holders of a note payable in the amount of $400,000. The
Company valued the shares at a price of $10.00 per share which was determined to
be fair market value.




During
the year ended December 31, 2008 we cancelled a total of 1,724,138 shares of
common stock. Non-performance of certain services by an outside professional
warranted this cancellation. The Company valued the original share issuance at a
price of $0.058 per share which was determined to be fair market value at that
time.




During
the year ended December 31, 2008 we issued a total of 1,000,000 shares of common
stock as payment for services under an investment banking agreement to a
corporate entity. The Company valued the shares at a price of $0.045 per share
which was determined to be fair market value.




53




ITEM
9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure




None.




ITEM
9A. Controls and Procedures




Disclosure
Controls and Procedures




Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, conducted an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
Annual Report (December 31, 2008), as is defined in Rule 13a-15(e) promulgated
under the Securities Exchange Act of 1934, as amended. Our disclosure controls
and procedures are intended to ensure that the information we are required to
disclose in the reports that we file or submit under the Securities Exchange Act
of 1934 is (i) recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms
and (ii) accumulated and communicated to our management, including the Chief
Executive Officer and Chief Financial Officer, as the principal executive and
financial officers, respectively, to allow timely decisions regarding required
disclosures.




Based on
that evaluation, our Chief Executive Officer and Chief Financial Officer
concluded that, as of the end of the period covered by this Annual Report, our
disclosure controls and procedures were effective.




Our
management has concluded that the financial statements included in this Form
10-K present fairly, in all material respects our financial position, results of
operations and cash flows for the periods presented in conformity with generally
accepted accounting principles.




It should
be noted that any system of controls, however well designed and operated, can
provide only reasonable, and not absolute, assurance that the objectives of the
system will be met. In addition, the design of any control system is based in
part upon certain assumptions about the likelihood of future
events.




Management’s
Annual Report on Internal Control over Financial Reporting




Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as defined in Exchange Act Rule 13a-15(f). Our
internal control over financial reporting is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of consolidated financial statements for external purposes in accordance with
generally accepted accounting principles.




Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
framework established by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) as set forth in Internal Control - Integrated
Framework. Based on our evaluation under the framework in Internal Control -
Integrated Framework, our management concluded that our internal control over
financial reporting was effective as of December 31, 2008.




This
annual report does not include an audit or attestation report of our
independent registered public accounting firm regarding our internal
control over financial reporting. Our management’s report was not subject to
audit or attestation by our independent registered public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
management’s report in this annual report.




Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. It should be noted that any system of controls,
however well designed and operated, can provide only reasonable, and not
absolute, assurance that the objectives of the system will be met. In addition,
the design of any control system is based in part upon certain assumptions about
the likelihood of future events. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.





54




Evaluation
of Changes in Internal Control over Financial Reporting




Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, also conducted an evaluation of our internal control over
financial reporting to determine whether any change occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting. Based on that
evaluation, our management concluded that there were no changes to our internal
controls. As of the end of the period covered by this Annual Report, no
deficiencies were identified in our internal controls over financial reporting
which constitute a “material weakness.”




ITEM
9B. Other Information




None









PART III




ITEM 10. Directors, Executive Officers and Corporate
Governance




Executive
Officers and Directors of the Registrant




The Board
of Directors appoints the executive officers of WHY USA, and the Chief Executive
Officer has authority to hire and terminate such officers. Each executive
officer holds office until the earlier of his or her death, resignation, removal
from office or the appointment of his or her successor. No family relationships
exist among WHY USA’s executive officers, directors or persons nominated to
serve in those positions.




Respective
name, age, position, term of office for each executive officer and director of
the Company, for the period covered by this report, is as follows:




Name
              Age
              Position(s) Held
              Appointment Date
              Resignation DateJames
      Kylstad
              56
              Chairman
      of the Board, Chief Executive Officer
              March
      2001Daryl
      Dinkla
              63
              Director
              April
      2005Bruce
      Clausen
              45
              Director
              May
      2002Kenneth
      Yonika
              44
              Chief
      Financial Officer
              November
      2007




JAMES KYLSTAD. From February
2001 through to date Mr. Kylstad has served as a member of the Board of
Directors as well as the Company’s Chief Executive Officer. From April 2005
through to date Mr. Kylstad has served as Chairman of the Board of Directors.
>From March 2003 through November 2007 Mr. Kylstad served as Chief Financial
Officer of the Company. Mr. Kylstad serves as a member of the Company’s
Compensation Committee. Mr. Kylstad, from 1994 to 2001, held the roles of
Chairman and Chief Executive Officer of American Home Capital Corporation, the
successor to TCS Enterprises, a publicly held company. Mr. Kylstad has been a
licensed California real estate broker for more than 25 years and has served on
numerous industry boards and committees.




DARYL DINKLA. From April 2005
through to date Mr. Dinkla has served as a member of the Board of Directors. Mr.
Dinkla chairs both the Company’s Compensation Committee and Audit Committee. Mr.
Dinkla previously served as a member of the Chicago Mercantile Exchange. Mr.
Dinkla has been active in the futures and options industry since
1971.





55




BRUCE CLAUSEN. From May 2002
through to date Mr. Clausen has served as a member of the Board of Directors and
as well as Vice President. Mr. Clausen from 1995 through to date has served as
President Discover.




KENNETH YONIKA. From November
2007 through to date Mr. Yonika has served as the Company’s Chief Financial
Officer. Mr. Yonika provides his services as a financial expert in the public
markets to several companies. In addition to his role as a consultant Mr. Yonika
sits on several privately held company boards. Mr. Yonika was a former Big Eight
certified public accountant with over 20 years of public company
experience.




Board
Membership and Director Independence




Mr. Daryl
Dinkla is the Company’s only “independent” director, using the definition of
“independence” set forth in the NASDAQ Marketplace Rules, which are not
currently applicable to the Company. Mssrs. James Kylstad and Bruce
Clausen are not “independent,” as defined in the NASDAQ Marketplace
Rules.




The
Company’s shares of common stock are not listed on a national securities
exchange or in an inter-dealer quotation system that has requirements that
directors be independent.  As a result, the Company’s Board of Directors
has adopted, pursuant to Item 407(a)(1)(ii) of Regulation S-B of the Securities
Act, the independence standards of the NASDAQ, as set forth in Rule 4200(a)(15)
of the NASDAQ Manual, to determine the independence of its directors and those
directors serving on its committees, if any.  These standards provide that
a person will be considered an independent director if he or she is not an
officer of the Company and, in the view of the Company’s Board of
Directors, is free of any relationship that would interfere with the exercise of
independent judgment.  In summary, an “independent director” means a person
other than an officer or employee of the Company or its subsidiary or
any other individual having a relationship which, in the opinion of the
Company’s Board of Directors, would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director, and includes any
director who accepted any compensation from the Company in excess of
$200,000 during any period of 12 consecutive months with the three past fiscal
years.  Also, the ownership of the Company’s stock will not preclude a
director from being independent.




The
Company’s Board of Directors has determined that Mr. Dinkla would meet
this standard, and therefore, would be considered to be
independent.




As of the
date of this report, the Company maintains a separately designated
audit, compensation or nominating
committee.  The Company has adopted this standard for
independence of its members of the audit committee.  Mr. Dinkla
currently is the sole member of the Company’s audit committee.  The
Company’s Board of Directors has determined that Mssrs. Kylstad and
Clausen are not “independent” for purposes of Rule 4200(a)(15) of the
NASDAQ Manual, applicable to audit, compensation and nominating committee
members, and are therefore not “independent” for purposes of Section 10A(m)(3)
of the Securities Exchange Act.




Section 16(a) Beneficial Ownership Reporting
Compliance




Based
solely upon a review of Forms 3, 4 and 5 filed with the Securities and Exchange
Commission, and other information known to the Company, during and with respect
to the fiscal year ended December 31, 2008, we believe that all directors,
officers and beneficial owners of more than 10 percent of our registered shares
timely filed all reports required by Section 16(a) of the Exchange
Act.




Code
of Ethics




The
Company has not yet adopted a code of ethics because its activities to date have
been focused on capital raising, cost-cutting efforts and the improvement
of its business operations.




56




ITEM
11. Executive Compensation




Compensation
Discussion and Analysis





In this
section, we discuss the principles underlying our executive compensation
policies and decisions and the most important factors relevant to an analysis of
these policies and decisions. We provide qualitative information regarding the
manner and context in which compensation is awarded to, and earned by, our
executive officers to give perspective to the data we present in the
compensation tables, as well as the narratives that follow the tables. The
following Compensation Discussion and Analysis describes the material elements
of compensation for the named executive officers identified in the Summary
Compensation Table below. Our chief executive officer, Mr. Kylstad, reviewed the
base salary, annual bonus and long-term compensation levels for the other named
executive officers.





For
fiscal year 2008 the Compensation Committee was comprised of one outside
director, Mr. Dinkla. Mr. Kylstad serves on the Compensation Committee and is
not considered an outside director.





Compensation
Philosophy





We reward
our named executive officers (identified in our 2008 Summary Compensation Table
below) for their efforts in helping us achieve improved results and for helping
us to take important steps to meet our long-term strategic goals.





Our
executive compensation mix includes a base salary, annual incentive bonus awards
and long-term compensation in the form of stock options. To further this
philosophy, we have designed our executive compensation program to achieve the
following objectives:





●
            Attract,
      motivate and retain key executive
talent;


●
            Provide
      appropriate incentives that motivate our named executive officers to help
      us achieve improved financial and operational performance;
    and


●
            Continue
      to align our named executive officers' compensation interests with our
      goal of improving long-term shareholder
value.





During
the past several years we have been engaged in a cost-cutting program to
significantly reduce expenses and move toward profitability. Because of this,
coupled with operational and management changes, as well as the limited use of
the Compensation Committee, the Company does not have a uniform compensation
plan for its executive officers.





During
fiscal year 2008 the Compensation Committee with input from our chief executive
officer developed a preliminary 2009 compensation package for our chief
executive officer as well as other future executive officers considering
competitive market data on salaries, target annual bonus incentives and
long-term incentives, as well as the executive responsibility, experience and
overall performance. The Compensation Committee did not give any specific
weighting to any of these factors, and did not adopt any formal plan or policies
for allocating compensation between long-term and current compensation, between
cash and non-cash compensation, or among other forms of different compensation.
This is due in part to the change in our management team, cost-cutting efforts
noted above and the need to tailor each executive's compensation package to
attract and retain that executive. Our Compensation Committee has not identified
a set of peer companies against which to benchmark executive
compensation.





Elements
of the Company's Compensation Program





The
compensation program for the Company’s executive officers is composed of three
principal components: base salary, annual incentive compensation and long-term
incentive compensation in the form of equity-based awards. Currently Mr. Kylstad
is the only member that falls underneath this program, as well as Mr. Kylstad
has elected to defer his entire compensation under this program during the
cost-cutting period which began in early 2004.





57





Base
Salary. Salaries are used to provide a fixed amount of compensation for the
executive's regular work. Paid in cash, they provide a fixed element of pay for
our executives and are established based on the scope of their responsibilities,
taking into account compensation paid by peer companies in our industry for
similar positions and taking into account individual job responsibility and
contribution. Base salaries are reviewed annually, and adjusted from time to
time to realign salaries with market levels after taking into account individual
responsibilities, performance, experience and other criteria.





The
Compensation Committee upon the completion of this report will review the
recommendations of the chief executive officer for base salaries for fiscal year
2010. The chief executive officer will propose base salary amounts for officers
of the Company based on his evaluation of individual performance, expected
future contributions and prevailing compensation in the spatial information
management industry for individuals with comparable responsibilities and
experience.





Annual
Incentive Compensation. While we do not have a formal bonus plan per se, annual
and incentive bonuses, if any, for our Named Executive Officers are granted at
the discretion of the Compensation Committee and may be delineated under the
individual employment agreements. During fiscal year 2008 the Compensation
Committee, had not authorized any incentive compensation for the named executive
officers.





Long Term
Incentive Compensation. Equity-based compensation and ownership ensures that the
Company's executive officers have a continuing stake in the long term success of
the Company. We believe the use of equity-based awards creates an ownership
culture that aligns the interests of our executives with those of our
stockholders. Historically our long-term incentives have been primarily in the
form of stock option awards that only produce value for our executives if the
price of our stock appreciates.





Because
we have experienced volatility in our business, the Company believes that stock
option grants provide a significant incentive to our employees and executive
officers.





Perquisites.
We provide, on a conservative basis, perquisites typically provided at companies
against which we compete for executive talent, including reimbursement of
automobile and other expenses, and such other perquisites as may be provided for
in an executive's individual employment agreement.





Other
Benefits. All employees may participate in our 401(k) Plan, which is a defined
contribution plan designed to encourage and assist employees to plan for
retirement. Eligible employees, including our named executive officers, may make
pre-tax deferral contributions to the 401(k) Plan of up to a specified
percentage of their compensation, subject to certain limits under the Internal
Revenue Service Code limits. We provide this 401(k) Plan to help our employees
save a portion of their cash compensation for retirement in a tax efficient
manner. WHY USA presently makes no matching contributions and does not
anticipate doing so pending a return to profitability.





All
fulltime employees, including our named executive officers, may participate in
our health and welfare benefit programs; including medical, dental and vision
care coverage, disability insurance and life insurance.





Severance
Compensation and Change in Control Benefits. We have limited or no employment
agreements with each of our named executive officers pursuant to which the
officer will receive benefits and payments if his employment terminates under
certain conditions. No agreements describe any condition for “Employment and
Change in Control Agreements.”





Accounting
and Tax Considerations





Because
of the limited levels of our compensation, we believe our compensation program
complies with Internal Revenue Code Sections 162(m) and 409A. Under Section
162(m) of the Internal Revenue Code, a limitation is placed on tax deductions of
any publicly-held corporation for individual compensation to certain executives
of such corporation exceeding $1,000,000 in any taxable year, unless the
compensation is performance-based. If an executive officer is entitled to
nonqualified deferred compensation benefits that are subject to Section 409A,
and such benefits do not comply with Section 409A, then the benefits are taxable
in the first year they are not subject to a substantial risk of forfeiture. In
such case, the executive officer is subject to regular federal income tax,
interest and an additional federal income tax of 20% of the benefit included in
income. The Company has no individuals with non-performance based compensation
who were paid in excess of the Internal Revenue Code Section 162(m) tax
deduction limit.





58





2008
EXECUTIVE OFFICER COMPENSATION





Summary
Compensation Table





The
following table sets forth summary information concerning compensation awarded
to, earned by, or accrued for services rendered to the Company in all capacities
by our principal executive officer, our former chief operating officer, and two
other most highly compensated employees of our operating subsidiary who were
employed at December 31, 2008 (collectively, the “Named Executive
Officers”):





Summary Compensation Table




The
following table sets forth information for the fiscal years ended
December 31, 2008 and 2007, respectively, concerning the compensation of
the Chief Executive Officer and Chief Financial Officer of the Company and each
of the four other most highly compensated executive officers as of
December 31, 2008, whose total salary and bonus for the year ended
December 31, 2008, exceeded $100,000 for services rendered in all
capacities to the Company. The Company has excluded information for columns G
and H as that information is not relative to the summary compensation disclosure
requirements.




(a)
            (b)
            
            (c)
            
            
            (d)
            
            
            (e)
            
            
            (f)
            
            
            (i)
            
            
            (j)Name
      andPrincipalPosition
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
              Awards
              ($)
            
            
            Option
              Awards
              ($)
      (4)
            
            
            All
      Other
              Compensation
              ($)
            
            
            Total
      ($)James
      Kylstad (1)Chairman
      and CEO
            2008
            
            
            100,000
            
            
            
            -
            
            
            
            75,000
            
            
            
            -
            
            
            
            -
            
            
            
            175,0002007
            
            
            100,000
            
            
            
            -
            
            
            
            75,000
            
            
            
            -
            
            
            
            -
            
            
            
            175,000Kenneth
      YonikaCFO
      (2)
            2008
            
            
            -
            
            
            
            -
            
            
            
            155,125
            
            
            
            -
            
            
            
            93,050
            
            
            
            248,1752007
            
            
            -
            
            
            
            -
            
            
            
            29,500
            
            
            
            -
            
            
            
            17,700
            
            
            
            47,200Bruce
      ClausenVP
      and Director (3)
            2008
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            16,569
            
            
            
            16,5692007
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            32,140
            
            
            
            32,140




(1)
            Mr.
      Kylstad provides his services under an employment agreement that provides
      for a base compensation in the amount of $175,000 per annum to be paid in
      $100,000 in cash and $75,000 in common stock. The Company believes that
      prior to December 31, 2009 all outstanding obligations due on Mr.
      Kylstad’s past services will have been paid in full in some fashion. Mr.
      Kylstad as disclosed elsewhere in this annual report has deferred payment
      of his compensation since early 2003.(2)
            Mr.
      Yonika provides his services under a consulting agreement as the Company’s
      Chief Financial Officer. The consulting agreement provides for monthly
      billings based upon the hours provided by Mr. Yonika. The consulting
      agreement is payable in cash and equity. Mr. Yonika has deferred payment
      of cash and equity compensation through owing as of December 31, 2008 in
      the amounts of $34,500 and $184,625, respectively.(3)
            Mr.
      Clausen was employed under an employment agreement that provides for a
      base compensation in the amount of $90,000 per annum prior to the year
      ending December 31, 2007. During 2007 Mr. Clausen converted his employment
      agreement to a commission based structure based on performance and
      production.(4)
            Represents
      the dollar amount recognized for financial statement purposes with respect
      to fiscal 2007 or 2008, as applicable, for the fair value of stock options
      granted in prior fiscal years, in accordance with SFAS
    123(R).





Grants of Plan-Based Awards Table




None of
our named executive officers received any grants of stock, option awards or
other plan-based awards during the fiscal years ended December 31, 2008 and
2007, respectively.




Options Exercised and Stock Vested Table




None of
our named executive officers exercised any stock options, and no restricted
stock units held by our named executive officers vested, during the fiscal years
ended December 31, 2008 and 2007, respectively.





59





Outstanding Equity Awards at Fiscal Year-end
Table




The
following table sets forth certain information with respect to the value of all
unexercised options and unvested stock awards previously awarded to our named
executive officers as of December 31, 2008.





Name
            
            Number
      ofSecurities
              UnderlyingUnexercised
              Options
      (#)
              Exercisable
            
            
            Number
      ofSecurities
              UnderlyingUnexercised
              Options
      (#)
              Unexercisable
            
            
            EquityIncentive
              PlanAwards:
              Number
      ofSecurities
              UnderlyingUnexercised
              UnearnedOptions
      (#)
            
            
            Option
              Exercise
              Price ($)
            
            Option
              Expiration
              Date
            
            Numberof
      Sharesor
              Unitsof
      Stock
              ThatHave
              NotVested(a)
            
            (b)
            
            
            (c)
            
            
            (d)
            
            
            (e)
            
            (f)
            
            (g)James
      Kylstad
            
            
            750,000
            
            
            
            -
            
            
            
            -
            
            
            
            $0.50
            
            February
      2011
            
            
            -Chairman
      and CEO
            
            
            1,000,000
            
            
            
            -
            
            
            
            -
            
            
            
            $0.20
            
            June
      2013
            
            
            -1,750,000
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            
            -Kenneth
      YonikaCFO
            
            
            -
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            
            --
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            
            -Bruce
      ClausenVP
      and Director
            
            
            100,000
            
            
            
            -
            
            
            
            -
            
            
            
            $0.20
            
            June
      2013
            
            
            -100,000
            
            
            
            -
            
            
            
            -
            
            
            
            
            
            
            
            
            -




(1)
            No
      named executive officer had outstanding stock or option awards for the
      years ended December 31, 2008 that would be considered compensatory to the
      officer. The Company and its Board of Directors may grant awards as it
      sees fit to its employees as well as key
  consultants.





2008
Option Exercises and Stock Vested





There
were no options exercised during fiscal year 2008.





Employment
and Change in Control Agreements





Employment
Agreements





James
Kylstad. During the periods from January 1, 2004 through December 31, 2007, our
chief executive officer, Mr. Kylstad, was compensated under his prior employment
agreement from 2001, as amended from time to time. His 2001 employment
agreement, described below, was subsequently further extended through December
31, 2008.





Mr.
Kylstad as payment for his services under a standard employment agreement with
the Company is to receive $175,000 in base compensation from the Company for
each year of employ. Base compensation shall be paid in the following manner:
$100,000 to be paid in the form of semi-monthly payments through the Company’s
payroll account with appropriate withholding and deductions, and $75,000 to be
paid in the form of a restricted stock grant based on the fair market value of
the shares on the date of issuance.





During
the past several years we have been engaged in a cost-cutting program to
significantly reduce expenses and move toward profitability. Because of this,
coupled with operational and management changes, Mr. Kylstad has graciously
deferred his compensation until such time as the cost-cutting efforts are
complete and the Company has regained its compliant status with the SEC. As of
the date of this report Mr. Kylstad is owed past due compensation totaling
$753,700. Of that amount $318,750 is due under the equity portion of his
employment agreement and payable in common stock of the Company, with the
remainder, $434,950, due and payable under the cash portion of his employment
agreement. Mr. Kylstad has informed the Compensation Committee that he would
like to resolve the outstanding balance of his past due employment by or before
the next annual shareholders meeting as well as enter into a new employment
agreement with the Company.





60





Change
in Control





Change of
control shall mean any change in the ownership or control of common stock of
Company resulting in more than 50% of its issued and outstanding common stock
being owned or controlled by a person or entity, or a group of persons or
entities, who did not own or control more than 50% of the issued and outstanding
common stock of the Company as of the date of the employment agreement; or a
merger or consolidation of the Company with another entity after which the
voting stock of the surviving entity has the same result. The Company currently
does not have within any of its employment agreements “change in control”
clauses.





Director
Compensation





The
Company currently does not provide any cash compensation to its directors. The
Company does, however, reimburse expenses incurred by our non-employee directors
to attend Board and committee meetings or other activities on behalf of the
Company. Directors who are also our employees do not receive cash or equity
compensation for services on our Board in addition to compensation payable for
their services as employees. Independent directors are eligible to participate
in the Company's 2000 Equity Compensation Plan under which non-qualified stock
options may be granted.





The
Company's previous standard stock option award retainer program for non-employee
directors has expired. The Company plans to establish a revised standard
director retainer program in the future.





The
following table sets forth a summary of the compensation we paid to our
non-employee directors in fiscal year 2008:




Fees
      Earned
              
              
              
              
              
              All
      OtherName
              
              or Paid in Cash
              
              
              Option Awards
              
              
              Compensation
              
              
              Total($)
              
              
              ($)
              
              
              ($)
              
              
              ($)Daryl
      Dinkla
              
              
              --
              
              
              
              --
              
              
              
              --
              
              
              
              --


The
Company has not compensated its outside directors for their services either as a
member of the Board of Directors or as a member of its committee’s for the years
ended December 31, 2004 through December 31, 2008.





Indemnification
of Directors





Pursuant
to the Company's articles of incorporation, the Company provides indemnification
of its directors and officers to the fullest extent permitted under the Nevada
Revised Statutes and provides certain indemnification to its executive officers
under their employment agreements. The Company believes that this
indemnification is necessary in attracting and retaining qualified directors and
officers.









ITEM 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters




Beneficial
Ownership




The
following table sets forth-certain information (as of March 31, 2009) with
respect to ownership of the outstanding voting stock of the Company by (i) all
persons known to the Company to own beneficially more than 5% of the outstanding
shares of the Voting Stock of the Company, (ii) each director of the Company who
held office during the calendar year ending December 31, 2008 (as well as the
preceding 3 years for the purposes of this report) as well each director who
currently holds office, (iii) the Company's Chief Executive Officer and each of
the Company's other executive officers who earned more than $100,000 during the
calendar year ending December 31, 2008; and (iv) all executive officers and
directors of the Company as a group.





61




NATURE OF BENEFICIAL OWNER
            AMOUNT OF BENEFICIAL OWNERSHIP
      (1)
            PERCENT OF OUTSTANDING
    SHARESJim
      Kylstad (2)
            14,959,684
            12.65%Daryl
      Dinkla (3)
            62,011,447
            47.77%Bruce
      Clausen (4)
            5,929,190
            5.47%Kenneth
      Yonika (5)
            4,712,695
            4.18%All
      executive officers and directors as a group (4 persons)
            87,613,016
            60.66%




_______________(1)
            Except
      as otherwise indicated, each person named in this table possesses sole
      voting and investment power with respect to the shares beneficially owned
      by such person. “Beneficial Ownership” includes shares for which an
      individual, directly or indirectly, has or shares voting or investment
      power or both and also includes warrants and options, which are
      exercisable within sixty days of the date hereof. Beneficial ownership as
      reported in the above table has been determined in accordance with Rule
      14d-3 of the Securities Exchange Act of 1934, as amended (the “Act”). The
      percentages are based upon 108,268,022 shares of voting stock outstanding,
      except for certain parties who hold exercisable options, warrants,
      convertible debentures and obligations under agreement to issue shares as
      compensation. The Company has approximately 36,153,564 common stock
      equivalents that are to be exercised,  issued or otherwise
      distributed within the next sixty days of the date
  hereof.(2)
            Jim
      Kylstad currently serves as our Chief Executive Officer and Chairman of
      the Board and owns 5,011,538 shares of common stock. For purposes of this
      table beneficial ownership includes common shares exercisable under option
      grants, warrant grants, conversion of debentures as well as employment
      obligations requiring the issuance of common stock of the Company.
      Pursuant to an employment agreement by and between Mr. Kylstad and the
      Company approximately 7,226,629 shares of common stock would be required
      to be issued.  Mr. Kylstad pursuant to his employment agreement
      for each calendar year he works is to receive $75,000 in restricted shares
      of common stock in addition to his cash compensation. The approximate
      number of shares has been determined using the variable weighted average
      price (“VWAP”) from the preceding 20 days trading of the Company’s common
      stock prior to authorization, which for these purposes is the date hereof.
      The shares, when issued, shall be restricted pursuant to Rule 144. Mr.
      Kylstad holds 1,750,000 options with exercise prices ranging from $0.20
      per share to $0.50 per share. The stock options are 100% vested and expire
      July 2010 through June 2013. Mr. Kylstad holds a convertible debenture
      with the Company in the amount of $102,803 that was due and payable on
      December 19, 2006. The convertible debenture is convertible into common
      stock of the Company at a conversion rate of $0.20 per share; the number
      of shares issued upon conversion approximates 514,016. Mr. Kylstad holds
      warrants exercisable into 457,501 share of common stock at an exercise
      price of $0.20 per share. These warrants expire on December 19,
      2009.(3)
            Daryl
      Dinkla currently serves as a member of the Board of Directors and chairs
      several of its committees. Mr. Dinkla owns 40,468,725 shares of common
      stock. Mr. Dinkla pursuant to several convertible debentures with the
      Company during the year ended December 31, 2007 exercised the conversion
      feature of these debentures totaling $1,600,000 along with accrued
      interest into 32,355,725 shares of common stock. Mr. Dinkla holds a
      convertible debenture with the Company totaling $950,200 that is due and
      payable during 2010. The convertible debenture is convertible into common
      stock of the Company. The number of shares issued upon conversion for
      purposes of this table approximates 21,542,722. The approximate number of
      shares has been determined using the VWAP from the preceding 20 days
      trading of the Company’s common stock from the date hereof. The conversion
      pursuant to the convertible debenture terms is 93% of the Company’s
      VWAP.(4)
            Bruce
      Clausen currently serves as a member of the Board of Directors as well as
      an officer of one of the Company’s subsidiaries. Mr. Clausen owns
      5,829,190 shares of common stock. Mr. Clausen holds 100,000 options with
      an exercise price of $0.20 per share. The stock options are 100% vested
      and expire May 2013.(5)
            Kenneth
      Yonika currently serves as Chief Financial Officer and Treasurer. Mr.
      Yonika owns 150,000 shares of common stock through a business entity that
      he controls with a family member. Mr. Yonika performs his professional
      services through a business entity that is engaged by the Company as an
      outside consultant. Pursuant to the consulting agreement entered into
      August 2007 Mr. Yonika’s business entity is to receive shares of common
      stock as partial payment for the services performed. Based on the amounts
      due under the consulting agreement as of this date the Company would be
      required to issue 4,562,695 shares of common stock. The approximate number
      of shares has been determined using the VWAP from the preceding 20 days
      trading of the Company’s common stock prior to authorization, which for
      these purposes is the date hereof. The shares, when issued, shall be
      restricted pursuant to Rule 144.




62





ITEM 13. Certain Relationships and Related Party Transactions,
and Director Independence




During
the year ended December 31, 2007, the Company entered into 6 convertible
debentures with Mr. Daryl Dinkla, a current director of the Company. The total
amount of related party convertible debentures entered into during 2007 was
$262,500. The convertible debentures are due and payable 36 months from the date
entered into, require monthly payments of interest of 7.0% per annum in arrears.
The convertible debentures are convertible into common stock of the Company
based on a discount to market of 7% of the 30-day trailing average closing price
of the Company’s common stock. The Company received notice during the year ended
December 31, 2007 that $492,500 in related party convertible debentures and
accrued interest were tendered for conversion in exchange for 9,772,725 shares
of common stock.





During
the year ended December 31, 2007, the Company entered into a short-term
arrangement with Mr. Daryl Dinkla, a current director of the Company for working
capital funds. As of December 31, 2007 this short-term arrangement amounted to
$50,000. In addition to the short-term arrangement the Company along with the
refinance of its Minneapolis, Minnesota property was required to obtain from the
related party a personal guarantee of the mortgage note payable with the
financial institution. In the case of default by the Company and the inability
to cure Mr. Dinkla would take possession of the property as well make payment to
the financial institution of the full amount due. The Company has filed a deed
of trust on its property for Mr. Dinkla’s personal guarantee with the financial
institution.





During
the year ended December 31, 2007, the Company entered into an agreement with
Quality Investments, Inc. and Wild Rose Partners, LLLP (the successor to Law
Investments, Inc.) who collectively own the $400,000 note payable that was in
default by the Company. Wild Rose Partners LLP is owned and controlled by Mr.
Grant Sardachuk, a former director of the Company; Quality Investments, Inc. is
owned and controlled by Mssrs. Dave Thomas and Clyde Brekken, both former
directors of the Company. Both Wild Rose Partners LLP and Quality Investments,
Inc. agreed to tender the outstanding principal and accrued interest in exchange
for a combination of common stock and preferred stock. The note payable in the
amount of $400,000 was exchanged for 40,000 shares of preferred stock of the
Company with a purchase price of $10 per share. Accrued interest due and payable
of $121,733 was tendered in exchange for 3,307,063 shares of common stock. As
part of the exchange agreement the Company recognized a gain on extinguishment
of debt of $49,867, whereby Wild Rose Partners LLLP and Quality Investments,
Inc. waived the default interest.





During
the year ended December 31, 2008, the Company entered into several short-term
arrangements with a current director of the Company for working capital funds.
As of December 31, 2008 these short-term arrangements amounted to $950,200
(which includes $50,000 as of December 31, 2007). Prior to year end, the Company
entered into 32 convertible debentures with a current director of the Company
memorializing these short-term arrangements in agreement. Total related party
convertible debentures entered into during 2008 were $950,200. The convertible
debentures are due and payable 36 months from the date entered into, requiring
monthly payments of interest of 7.0% per annum in arrears. The convertible
debentures are convertible into common stock of the Company based on a discount
to market of 7% of the 30-day trailing average closing price of the Company’s
common stock. In addition the Company recorded approximately $36,000 in accrued
interest due on these convertible debentures.





During
the year ended December 31, 2008, the Company entered into two notes payable
with an officer of the Company and an employee. These note payables bear
interest at 16% and 8%, respectively. As of December 31, 2008 the Company
recorded reimbursable business expenses due to this officer in the amount of
$10,022.




Board
Membership and Director Independence




Our Board
of Directors has determined that Mr. Daryl Dinkla qualifies as an independent
director under rules promulgated by the SEC. He currently serves as the head of
the Company’s Audit Committee as well as the Compensation Committee until the
earlier of his retirement or replacement by the Board of Directors. There are no
family relationships among any of our executive officers or
directors.





63




During
fiscal year 2008, the Board of Directors held two meetings. The Audit Committee
met to discuss the year end audited financial statements and this report, prior
to the filing of this report on Form 10-K. The Compensation Committee for fiscal
year 2008 did not meet. Each of our current directors attended at least 90% of
the aggregate total of meetings of the Board of Directors and committees on
which he served. All meetings were attended by a quorum of the directors and all
measures were reviewed in detail by each member of the Board of
Directors.







ITEM
14. Principal Accounting Fees and Services




In
connection with the audit of the 2008 financial statements, the Company entered
into an engagement agreement with PKF Certified Public Accountants, A
Professional Corporation (PKF) which set forth the terms by which PKF has
performed audit services for the Company. That agreement is subject to
alternative dispute resolution procedures and an exclusion of punitive
damages.




The
following table sets forth the aggregate fees agreed to by the Company for the
annual and statutory audits for the fiscal years ended December 31, 2008
and 2007, and all other fees paid by the Company during 2008 and 2007 to its
principal accounting firm, PKF:




For the Years
      Ended December 31,2008
            
            
            2007Audit
      fees (1)
            
            $
            103,284
            
            
            $
            23,640Audit-related
      fees
            
            
            -
            
            
            
            -Tax
      fees (2)
            
            
            18,640
            
            
            
            45,759All
      other fees
            
            
            -
            
            
            
            -Total
            
            $
            121,924
            
            
            $
            69,399




(1)
              Audit
      fees for the year ended December 31, 2007, were primarily for the
      company’s subsidiary TCS statutory audits. The Company re-established its
      audit services for the holding company WHY USA Financial Group, Inc. in
      early 2008, completing the four years of audits that the Company was
      non-compliant with the SEC.(2)
              Tax
      fees for the year ended December 31, 2007 was incurred to bring the
      Company’s consolidated tax returns current and timely
    filed.


The Audit
Committee has determined that the rendering of all non-audit services by PKF is
compatible with maintaining the auditor’s independence. The fees listed under
“Audit Fees” above were incurred for services related to the annual audit of the
Company’s wholly-owned subsidiaries; TCS and subsidiaries consolidated financial
statements, NA financial statements, and services that are normally provided in
connection with various statutory and regulatory filings and engagements. The
fees listed under “Audit-Related Fees” above were incurred for service related
to mergers and acquisitions and benefit plan audits, and the fees listed under
“Tax Fees” above were incurred for service related to federal, state and
international tax compliance and planning. The Audit Committee approves
non-audit services by PKF on an ad hoc basis, and has vested authority with
Daryl Dinkla, the chairman of the Audit Committee, to approve non-audit services
as needed.









PART
IV




ITEM
15. Exhibits and Financial Statement Schedules




(a)
            1.   
      Financial Statements




64





The
following consolidated financial statements of WHY USA Financial Group, Inc. are
included in Item 8.




PageReport of Independent Registered
      Public Accounting Firm
            
            32Consolidated
      Balance Sheets
            
            33Consolidated
      Statements of Operations
            
            34Consolidated
      Statements of Stockholders’ Equity
            
            35Consolidated
      Statements of Cash Flows
            
            36Notes
      to Consolidated Financial Statements
            
            37




2.
            Financial
      Statement Schedules: Schedule II—Valuation and Qualifying Accounts
      Financial statements and schedules are omitted for reason that they
      are not applicable, are not required, or the information is included in
      the Consolidated Financial Statements or the Notes to Consolidated
      Financial Statements.


3.
            List
      of exhibits filed with this Annual Report on Form 10-K: For a list of
      exhibits filed with this Form 10-K, refer to the exhibit index beginning
      on page 67.






65




SIGNATURES




Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.




WHY
      USA Financial Group, Inc.Date:
      March 31, 2009
            By:
            /s/  James
      B. KylstadJames
      B. KylstadChairman
      and Chief Executive Officer(Principal
      Executive Officer and
Authorized Signatory)




Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant in the
capacities and on the dates indicated:




SIGNATURE
            
            TITLE
            
            DATE/s/
      JAMES B. KYLSTAD
            
            Chairman
      and Chief Executive Officer
      and Director (Principal Executive Officer)
            
            March
      31, 2009James
      B. Kylstad/s/  KENNETH
      J. YONIKA
            
            Chief
      Financial Officer (Principal Financial Officer)
            
            March
      31, 2009Kenneth
      J. Yonika/s/  DARYL
      B. DINKLA
            
            Director
            
            March
      31, 2009Daryl
      B. Dinkla/s/  BRUCE
      CLAUSEN
            
            Director
            
            March
      31, 2009Bruce
      Clausen






66




INDEX
TO EXHIBITS




EXHIBIT
              NUMBER
            
            DESCRIPTION
      OF DOCUMENT2.1
            
            Reorganization
      between the Black Butte Petroleum, Inc. and Triam Ltd., dated March 23,
      1983 (1)2.2
            
            Acquisition
      Agreement between Triam Ltd. and Northwest Financial Ltd., dated December
      16, 1999 (1)2.3
            
            Acquisition
      Agreement Addendum, datedDecember 20, 1999
      (1)2.4
            
            Stock
      Purchase Agreement dated September 24, 1999 between Northwest Financial
      Group, Inc., WHY USA NA, and its selling shareholders
  (1)2.5
            
            Addendum
      to Stock Purchase Agreement, dated December 30, 1999 including Assignment
      to Donald Riesterer    (1)2.6
            
            Share
      Exchange Agreement – Cashline transaction, dated February 8, 2001
      (3)2.7
            
            Business
      Combination Agreement to acquire Discover Mortgage Corp. effective January
      1, 2002 (2)3.1.1
            
            Articles
      of Triam Ltd., dated January 6, 1983 (1)3.1.2
            
            Amendment
      to Articles of Incorporation, March 4, 1983 (1)3.1.3
            
            Amendment
      to Articles of Incorporation, filed March 29, 1983 (1)3.1.4
            
            Articles
      of Merger, filed on November 9, 1999 (1)3.1.5
            
            Amendment
      to Articles of Incorporation, Jan. 10, 2000 (1)3.2
            
            Bylaws
      (1)10.2
            
            Stock
      Option Plan (2)10.3
            
            Sample
      Option Agreement (4)10.4
            
            Assignment
      and Assumption Agreement between Northwest Investment Trust and the
      Company Re: Cashline (4)10.5
            
            Assignment
      and Assumption Agreement between Northwest Investment Trust and the
      Company Re: Alliance West  (4)10.6
            
            Franchise
      Purchase Agreement, dated March 31, 2001
(4)





(1) Filed
with the Company's initial Filing on Form 10-SB on May 10, 2000.




(2) Filed
with the Company's Form 10-SB/A No. 1 on August 28, 2000.




(3) Filed
with the Company's Report on 8-K dated February 21, 2002.




(4) Filed
with the Company's Annual Report on 10-K on April 16, 2001.






EXHIBIT
              NUMBER
            
            DESCRIPTION
      OF DOCUMENT23.1
            
            Consent
      of Independent Registered Public Accounting Firm31.1
            
            Certification
      of Chief Executive Officer31.2
            
            Certification
      of Chief Financial Officer32.1
            
            Certification
      of Chief Executive Officer32.2
            
            Certification
      of Chief Financial Officer







67